3 steps to sell and communicate price increases
How will your business survive amidst surging inflation and increased costs for energy and raw materials?
How will you ensure customers buy your products and services when they need to spend more on almost everything? Right now, these questions are top of mind for you and other business leaders. Unfortunately, most factors that contribute to inflation are out of your control. However, there are a few key strategies you can leverage to mitigate the consequences of inflation.
1. Rethink your value proposition
More than ever, a clear, targeted value proposition is mission critical. To reach customers in a time when they are hesitant to spend, you need to address their specific needs and desires, which requires having deep insights about them. Without this understanding, it’s impossible to highlight the value that your offering provides. To dig deeper, conduct customer focus sessions or interviews to understand what they value most and why. Leverage the following process to structure how you rethink your value proposition.
- Customer Understanding: Know your customer better than anyone else and appreciate the difference between customers.
- Customer Segmentation: Gain a solid understanding of the segmentation process. Segment your customers based on your customer understanding.
- Specific Value Proposition: Develop segment-specific offerings based on customer insights. Create segment-specific value propositions.
2. Redesign your pricing approach and strategy
Amidst high inflation, price is a sticking point for customers – but increases are often necessary for the longevity of your business.
When considering price increases, ask yourself, what do we want to achieve? Your pricing approach and strategy depend upon how much of a price increase you can afford. Do you want to gain market share with your premium brand? Do you need to defend against a private label? You must consider these questions when rethinking your pricing strategy because price increases should not jeopardize your overall strategy.
Regardless of which path you choose, use insights you’ve gathered about customers as you reevaluate. Your pricing should reflect the benefits of your offering.
Depending on your customers’ price sensitivity, their reaction will be different. Consider these factors when redesigning your pricing strategy:
- Customer’s income statement / financial status
- Customer’s willingness to pay
- Customer’s industry and product segments (necessities vs. luxury goods)
- Availability of alternative products and substitutability
However, your price increase shouldn’t be too moderate (< 2%). An increase needs to be worthwhile and secure your margin, so you don’t have to raise prices too often.
3. Communicate your price increase
Raising prices without a thoughtful communication strategy can backfire and harm your relationships with customers. Remember, your customers are also facing higher prices for almost all goods and services, so be sure sellers are equipped to approach the situation with care.
Create a compelling story that sellers can use to frame the price increase highlighting the value your customers will receive when purchasing your offering. What additional benefits will they receive at this new price? Why should they be willing to pay more?
As part of the story, sellers should only plan to mention the increase in input costs as a secondary factor. But, if higher input costs are the reason for the price increase, sellers should not be afraid to communicate this. Transparency counts.
Decades of psychological studies have proven that calling it what it is – a price increase – and avoiding euphemisms is important to customers. Sellers will often call it “price update” or “price adjustment” because they are afraid of customers’ reactions. However, customers value authenticity and honesty more than diluted messaging.
Another important factor is time. Since your customers might need some time to adapt to your increased prices, the earlier sellers communicate, the better.
In summary, before communicating the price increase to customers, be sure your sellers are prepared to do the following:
- Create a value-first storyline without neglecting external factors
- Avoid euphemisms and let customers know what they can expect
- Communicate in a timely manner
Whether you’re restating your value proposition or adjusting your prices, collecting feedback and insights from customers enables you to build trust and serve them better. This is especially critical during inflationary periods when price can be sensitive and communicating changes must be approached with consideration and care. However, putting in this additional work will be rewarded with steadfast customer loyalty even if price increases persist.
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Today’s customers are more informed, more selective, and more time-poor. They need conversations that help them prioritize, decide, and move forward.
And yet, 58% of sales meetings fail to create real value.
Not because sellers lack capability, but because conversations are not designed to move decisions forward.
“Customers don’t act on every need they recognize.
They act when something becomes a priority.”
In this short executive brief, you’ll discover
- Why most conversations inform… but don’t drive action
- What actually makes customers prioritize and move
- How to create urgency without damaging trust
- The shift from presenting solutions to enabling decisions
- What separates conversations that stall from those that accelerate momentum
If your teams are experiencing stalled deals, delayed decisions, or slow pipeline movement, this brief will help you understand why, and what to do differently.
In today's fast-changing business environment, excelling in Revenue Growth Management (RGM) is essential for Commercial Leaders aiming to boost revenue and profit, both now and in the future.
Unlike traditional methods that confine RGM to pricing actions, forward-looking Commercial Leaders recognize that activating a holistic, end-to-end RGM strategy that is consumer/shopper focused and customer-back, leads to more significant growth and allows leaders and teams to not only anticipate, but actively influence consumer demand and customer needs.
Historically, Revenue Growth Management (RGM) has been approached as a temporary and reactionary project, which was typically led by external experts in response to inflationary markets. This limited approach confined the benefits to a small part of the business and focused on short-term results, rather than embedding RGM as an ongoing, fundamental aspect of business strategy that could deliver sustained, long-term growth.
Today, mature RGM organizations treat RGM strategy and execution much differently, positioning the actions at the center of their strategic operations, embedding capabilities deeply within their organizational processes and ways of working. This transformation is not just procedural but is a shift that forces RGM strategy, tactics, and mindset into every action and function of the business.
Strategic integration of RGM at scale: A roadmap for success
- Build strong in-house expertise: To see the scaled benefits of RGM, develop strong capabilities within your commercial teams and intermediate understanding of your cross-functional teams. When your leaders and teams fully grasp RGM tactics and mindsets, it creates scaled-impact that can be sustained without external reliance.
- Encourage cross-functional collaboration: The effectiveness of RGM strategy and execution is only fully realized when it involves a fully cross-functional team. Promoting collaboration between sales, marketing, finance, R&D, and the supply chain enriches insights, strategy and execution feasibility, and organizational success.
- Integrate RGM strategy into key business processes: By connecting RGM directly to critical operations such as budgeting and strategic planning, you ensure that RGM principles are woven into the fabric of annual planning instead of being treated as a one-time project. This integration influences everyday decisions and guides long-term business strategies.
- Overcome implementation challenges with effective change management: Embracing a robust RGM approach involves substantial change and a shift in traditional revenue growth mindsets. Address these challenges through strong change management practices, aligning team incentives with new strategies and providing clear, successful examples of RGM in action to inspire and motivate your teams.
The competitive edge of building RGM capability across the organization:
- Encouraging innovation from Consumer-Back: It’s no surprise that RGM should be activated starting with consumer and shopper insights. When truly building a strategy from the consumer-back, you build a mindset and process that is ripe for innovation. This helps your company stay competitive and lead industry trends and demands, instead of reacting.
- Aligned decision-making for the short and long-term: A thorough RGM strategy speeds up and improves the day-to-day decision-making process of consumer and customer facing commercial teams. It helps ensure that decisions—like setting pricing strategies, choosing promotional activities, or allocating resources—are aligned with the market’s immediate needs and long-term goals for the category.
- Boosting market responsiveness: In today’s volatile business climate, the ability to swiftly adapt to market changes is invaluable. Decentralizing RGM capabilities enables cross-functional local teams to be agile to market shifts in strategic ways, turning potential challenges into opportunities, while still staying aligned to the longer-term market objectives.
- Cultivate a results-driven culture: Building RGM roles across the organization allows for greater ownership and accountability to improve revenue and ultimately grow market share. This means a greater population has a direct role to play in driving business performance and are responsible for keeping an external pulse on consumers, shoppers, and customers.
Implementing a cohesive RGM strategy, instilling the right mindsets, and providing the leaders and teams with the tools and processes needed to be successful, is no small feat. However, the revenue, profit, and market share impact can be substantial when an aligned RGM strategy is deployed at scale. This strategic commitment positions your company for enduring success and a powerful competitive advantage in today’s dynamic consumer, shopper, and customer landscape.
While small and medium-sized enterprises (SMEs) play a vital role in driving economic growth and innovation, they often face unique challenges when dealing with banks. This makes relationship banking crucial to their success. By strengthening their relationship banking models, banks can differentiate themselves from competitors by improving the support they provide to SMEs, helping these businesses overcome challenges and thrive in the marketplace. In discussions with owners of SMEs about their experiences with banks, four common concerns emerge:
- Access to credit. Obtaining financing for purposes such as working capital, expansion, or equipment purchase is a significant challenge for SMEs. Banks often perceive them as riskier borrowers due to their limited credit history, lack of collateral, or volatile revenue streams, which can make it difficult to secure loans.
- High interest rates and fees. SMEs may face higher interest rates and fees compared to larger, more established businesses due to banks' perception of greater default risk, as well as limited financial transaction volumes.
- Complex application processes. SMEs often face time-consuming and complex loan application processes, requiring extensive documentation such as financial statements, tax returns, and business plans.
- Inflexible lending terms. SMEs may struggle with inflexible lending terms, including strict collateral requirements, short repayment periods, or covenants that restrict operational flexibility. These terms can make it difficult for SMEs to manage cash flow and invest in growth.
By adopting the following approach, relationship managers can help businesses overcome these challenges:
- Advocate for clients within the bank, helping them secure financing for business expansion, capital investments, working capital growth, and asset accumulation.
- Offer guidance on optimizing cash resources within the constraint of limited capital resources.
- Provide advice on managing personal wealth accumulated through business ownership.
This approach requires a set of knowledge and capabilities:
- Business acumen—an understanding of SMEs’ unique needs and business challenges.
- Recognition of the essential role cash flow plays in small business success and an understanding of how to optimize it.
- Familiarity with the financial impact of bank products on SMEs' finances.
- Understanding of small business funding models, including the roles of owners, banks, and investors.
- Insight into the migration of SMEs to medium-sized enterprises.
Equipped with these capabilities and this knowledge, bankers can employ critical relationship management skills at four key stages:
- Planning. Gain local market knowledge and industry/sector expertise before engaging with clients.
- Discovery. Approach SMEs with a focus on their unique needs, recognizing the distinct characteristics of owner-managed and owner-financed businesses.
- Engagement. Position offerings from a client-impact perspective, rather than a bank- product perspective, addressing the specific needs and challenges of SMEs.
- Closing. Adopt a partnering approach and act as an advocate for SME clients within the bank, particularly when dealing with credit functions and decision-makers.
By focusing on these areas, banks can enhance their relationship banking model for SME customers, providing personalized support and tailored financial solutions to help small businesses succeed in a competitive landscape.