How Should Manufacturers and Wholesale Distributors Announce Price Increases?

Price increases in industry are a fact of life. Most manufacturing companies and wholesale distributors see rising costs on a regular basis and feel the need to respond with price increases to maintain margins. But, how do you best announce price increases to your customer base?

Depending on the customer profile there may be several approaches employed. Larger accounts may require a personal meeting to announce the increase and explain the impact on the account. Customers that order infrequently, say once a year for a small quantity, may not warrant an announcement at all. They may just see the increase at the time of the next order.

However you approach a price increase announcement it is likely that you will want to draft a letter explaining the increase. Over the years our pricing consultants have seen numerous letters announcing increases many of which we feel are ineffective.

Here are some recommended steps to building an effective price announcement letter. See if your announcements follow this pattern.

• Create a “value sandwich”. Before actually stating the increase in the letter deliver a summary of the value that your company delivers. Explain recent initiatives that contribute to delivered value like a CRM program for example. Then, after you state the actual price increase, close with a brief summary of delivered value again.
• Keep the actual explanation of the increase short and to the point. Avoid vague language and uncertainty. Simply state the increase amount if possible and the effective date.
• Focus on your relationship with the customer. You desire to continue be a long term partner with this account and the increase will help to insure continued product quality and service.

How you handle price increase announcements can make or break the results. Well thought-out  price announcements have a higher acceptance rate with customers. Spend the time and attention to the details to ensure that you get the most out of your increases.