youKNOW

Sales Manager

The dreaded price INCREASE!

I'm assuming everyone on here has heard that the price for pretty much everything is going up!

My specific market (semiconductor/components) has been pretty crazy with the price increases since the end of last year.

I'm keen to hear about how people in different segments deal with increases with their clients/ customers. I tend to think that one of the MOST important objections to handle well is when you have bad news, and LBH...price increases can be a mofo with the wrong type of customer.

Let's hear what you got!

😎 Sales Skills

😤 Conflict Resolution

22 comments

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UrAssIsSaaS

Arsonist

SaaS Eater

Are you selling to existing customers or new business?

youKNOW

Politicker

Sales Manager

Both. The scenario works either way. New customers wouldn't necessarily have the same frame of reference since they hadn't bought from us previously.

UrAssIsSaaS

Arsonist

SaaS Eater

Ya thats why I was curious. For new customers that need semiconductors, it sounds like thats just the market rate, and for you as a seller thats probably a good thing. Unless you have competitors that can undercut you significantly on price it sounds like a simple, this is the price, we can build in x discount for scale but based on the market, this is what it is.

For existing clients I would build in a scaler like @FlintIronstag outlined. Give them a discount vs current market rates but increase over the cost of prior orders.

With zero industry knowledge those are the ideas that come to mind for me.

FlintIronstag

Notorious Answer

Chief Marketing Officer

I love you.

UrAssIsSaaS

Arsonist

SaaS Eater

The feelings are mutual

youKNOW

Politicker

Sales Manager

Thanks, yeah in this specific case I'm more curious who you guys handle price increases in your business. How do you go about it, doing what you do, @UrAssIsSaaS ?

UrAssIsSaaS

Arsonist

SaaS Eater

Our business sells front of house software to restaurants so a price increase is off the table in every way shape or form right now.

We increased our pricing about 2 years ago because we were WAY under valuing our product as a new company trying to gain market share. Once we had traction we needed to increase price to make the business viable so we did it in a tiered approach. For new business we just increased the base price for our core SaaS product and put a discount floor that reps could sell to. This was super effective as we 2.5x our average price in about 3 months.

For existing clients we gave 6, 3, and 1 month warnings that their price was going from X to Y. The increase kept them below current market pricing but did increase their average spend to a sustainable level for the business. We also built in an assumed churn number because we knew a certain subset of clients would churn no matter what if we touched their pricing (and honestly those clients were costing us more than they were spending anyway so its a win for us).

2 years later our average customer spend is 2-3x what it was pre price increase.

Hope this is the type of answer you were looking for!

DustFrog

Catalyst

Business Development Manager

You just have to bite the bullet and be prepared with some ammo if you have to start shooting down objections. The truth is that even if they play dumb, most supply chain people at these organizations (B2B stuff) know an increase is coming. Their job is based on knowing the weather in the market for whatever commodity they play in (I'm in steel), so as long as you aren't trying to take advantage of the cost increase and it's proportional, you won't find much kick back. It costs them a ton of money to switch to a new supplier, generally.

The silver lining is that you get to find out which of your buyers are liars (generally most). If they act surprised, especially when it comes to semiconductors this year, you can't really trust them to be reasonable moving forward, and you can go in armored with that information next time.

youKNOW

Politicker

Sales Manager

Yeah, agreed. It generally goes that way. Market pricing goes up, vendor increases prices, buyer freaks (even if they knew it was coming.) Everyone moves on.
And you're right, buyers are liars. Especially when their guard is up, and also if they don't know their market, OR they don't trust the information that a salesperson may be giving them.

SabertoothSales

Valued Contributor

Southeast Regional Manager

We are going to have a rolling price increase going into effect sometime this month where our core product lineup will be increased right away and then some of the less common products will surely all be increased by the end of the year.

Everyone I have spoken with seems to be okay with the idea, because...
1) Everything is more expensive today than it was a year ago
2) We have not had a price increase in about 4 years, so it was coming, Covid or not!

cw95

Politicker

Sales Development Lead

This is good, similar to us. If it works/helps then people shouldn't really care that much!

FlintIronstag

Notorious Answer

Chief Marketing Officer

We build in an escalator to keep up with inflation.

'...will increase without notice by two percent (2%) over the prior year's rates and become effective on each anniversary of the effective date of this agreement ("Annual Rate Adjustment")."

eman

Politicker

Account Executive

Just be honest...your bosses have to know that if a deal is already executed then that's the price.

Blackwargreymon

Politicker

MDR

The silver lining is that you get to find out which of your buyers are liars (generally most). If they act surprised, especially when it comes to semiconductors this year, you can't really trust them to be reasonable moving forward, and you can go in armored with that information next time.

SiliconWolf

Good Citizen

Strategic Account Manager

Hey, I am in the same market as you, and I had to do this back at the end of March to my largest customer with a subsidiary my company owns. It went well but we provided a lot of reasons why we had to increase prices.

This customer has had a lot of history with us with this product, and has aggressively pushed for price reductions over the years, which has been OK up to this point, even though it has led to low margins, we are ok with it because ti has lead to other business, and kept our main competitor away. Material costs have gone up ~30% so we had no choice.

It does also helo that we know our competitor can't really compete, maybe get close to meeting the new price with the increase, but our product has been proven to be superior.

This has been happening around the industry so while no body wants it, it is almost expected, work with your cusomters and see how you can save them money other ways!

Clashingsoulsspell

Politicker

ISR

Ya thats why I was curious. For new customers that need semiconductors, it sounds like thats just the market rate, and for you as a seller thats probably a good thing.

FeedTheKids

Politicker

Solutions Consultant

Honestly, when you build rapport with existing customers it helps ease the blow, and if you have a few other value props to add along with the price increase it helps.

For new prospects - I use the price increase to help instill a sense of urgency and close deals.

"Costs are going up by X by the end of the month, lets get a deal in place to lock you in for the next year" = $$$$$

GDO

Politicker

BDM

Increases can be due to 2 things in my mind:
- inflation
- addition of features

CuriousFox

WR Officer

🦊

Be transparent and remind them you are in line with the market.

MR.StretchISR

Politicker

ISR

Are you selling to existing customers or new business?

Mr.Floaty

Politicker

BDR

Get creative.

Cyberjarre

Politicker

BDR

Could not have said it better. Plus you spend half what you save on a CPA to cook the books. Not worth it.

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youKNOW

The dreaded price INCREASE!

22 comments

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