Pricing is high on the agenda of our customers and our freelance associates. As a result, Minds&More ran two separate webinars, gathering nearly a hundred marketers, sales, and finance people to discuss the best practices to deal with a price increase. Our discussion focussed on B2B companies with direct or indirect sales forces.
The consensus of the two sessions was: price increases are way underprepared and, as a result, create unnecessarily high amounts of detractors in their customer base. There is no science to doing it right, but there are quite some best practices that will reduce the impact.
You may enjoy the below recap of the critical learnings supported by some very revealing results of our polls.
Everybody’s first time
We are facing historic price increases, the likes of which we have never seen in the last 40 years. So another way of looking at the exceptional nature of the current context is: two generations of sellers have never learned how to manage double-digit price increases, and two generations of buyers did not anticipate nor know how to deal with such price increases.
So, the adage “Nobody wants to sell a price increase, nobody wants to buy a price increase” becomes “Nobody knows how to sell a price increase, nobody knows how to buy a price increase.”
Yet we are all massively driven today to do price increases: research by Simon & Kucher shows that already 54% of companies have done a price increase this year and more are in the process of getting prepared.
Prepare together
In our poll, 49% claimed they had “no preparation whatsoever”. Reflecting the cliché, we hear a lot about price increases: discussed and agreed by the CEO/CFO on Monday with the announcement letter to the customer sent one week later.
Today’s best practices will focus on securing the right content and sales skills. However, to succeed, you must ensure sufficient time to prepare across sales, marketing and finance.
A price increase must be considered as a complex go-to-market campaign where collaboration is needed before, during and after the campaign is done between Sales, Marketing and Finance. Unfortunately, only 46% of the customers polled had a good alignment between sales and marketing and even less with finance.
So, let’s focus on the first step of preparation, securing the right content.
Customer-centric narrative
We need to develop a price increase narrative that is customer-centric. Beware of having a mindset of “inform & justify”. Refrain from explaining your internal issues and why you are doing what you are doing. Instead, use the opportunity to link your narrative of a price increase to your unique selling proposition and value proposition. And reassure the customer that your solution or brand remains for them in the future.
Here are a couple of pointers to focus on:
Segmentation: make sure you segment your customer base and decide if a single narrative applies to all segments.
Customer-centric Value Proposition: the good news is that 72% of the customers polled say they have a value proposition. Too often, especially in B2B, the Value Proposition is just a list of core product features. Put more effort into identifying what elements of the value proposition truly drives value for a target of customers.
Update your Value Proposition: especially before a significant price increase, take the time to refresh your value proposition. Rampant inflation may have significantly impacted your tangible Value Proposition or Return on Investment. Yet, in our poll, only 50% update their Value Propositions regularly.
Double up on emotional value drivers: Bain & Co research confirmed that nearly half of the 40 features that can drive value in B2B are emotionally or socially driven. However, yet again, only 46% of companies polled claimed to leverage emotional drivers in their Value Proposition.
The last step is to incorporate your Value Proposition in one of the five most common price increase narratives. In our poll, 43% of our customers did not prepare a price increase narrative.
So let’s focus now on the second step of preparation, preparing sales.
Prepare sales to engage
When deploying price increases, we see a massive gap in customer engagement. First, sales do not consider price increases part of their role nor make sufficient time to engage with customers. Why would they? They view this as a necessary evil admin task they hate doing, and secondly, price increases upset customers and relationships.
“I’m supposed to be the popular person who gets the customer the best deal. I cannot betray my customers. Let management, or even better marketing, take the blame.”
Handling Objections: a core skill to focus on is handling objections. Best-in-class objection handling probes deep into understanding customer frustrations before identifying and providing resolutions. Only in this way can sales help the customers to accept the price increase.
Role Play Practice: there is no standard off-the-shelf training to prepare for delivering significant price increases. Hence, managers need to create a safe zone where sales teams can rehearse the price increase narrative and identify and address potential mental roadblocks and customer objections. Unfortunately, in our poll, only 36% of customers claimed that their sales teams get trained in a safe zone.
Monitor during and after: monitoring is critical to securing strong feedback loops. Checking the actual deployment of the customer visits and the customer reaction allows for possible approaches and narrative adaptations.
It works
Recently, one of our customers validated the importance of focussing on a customer-centric narrative and closing the engagement gap with large-scale customer research. The traditional product-centric narrative had a more significant negative impact on their NPS score than a customer-centric narrative offering to engage with the customer.
So, while this is never an exact science, the tips shared today will hopefully help you create better-integrated price increase campaigns. And help your sales teams to confidently sell the price increase while keeping their customers engaged.
Feel free to contact us if you want to discuss this further or watch the webinar replay.
Authors: Grégoire Vanderveken, Christian Lofberg and Stéphane Beauduin