With inflation at the door-step you may be thinking about increasing your prices. If you are getting cost increases from your suppliers you may have no choice but to boost your own prices to maintain margins. There are three critical factors to manage when implementing price increases to ensure that you will realize the result that you expect.
First, segment your price increases across your business. Identify which products and customer segments can tolerate higher increases and which ones need lower amounts or none at all. Smaller accounts have less price sensitivity while your largest accounts may not accept any increase. However, there are exceptions to this rule. When raw materials are increasing across an industry, all customers should get an increase with some negotiation expected with large accounts.
Second, train your customer facing teams to communicate and defend the increase before it is implemented. The majority of failed increases lies at the point of sale when buyers push back. Be sure your teams know how to defend the increase and provide them with the tools and materials that support the program. Increase initiatives typically realize only one-third of the asked-for increase. Initiatives that include training for customer facing teams realize 80% or more of the announced increase. As with most initiatives, success lies in execution.
Finally, be sure to measure the price increase. Price can be isolated from all other profit drivers to provide a definitive result. Knowing if you are on track to achieve your goal early in the initiative can mean the difference between success or failure. If early results are behind target you can identify where the program is lagging. For instance, certain larger customers may be pushing back. Or, certain sales reps may be caving in negotiations. In one case, a company communicated the increase but never reflected the new prices on invoices going forward. If you’re not measuring the results, you won’t know when you’re behind.
Measuring price results is easy if you have the right tools. Our Acuity Analytics toolset provides all the measurement and drill-down capability to provide clear visibility to price increase results. Your sales invoices provide the data. The tool provides the visibility.