Confidently Sell the Price Increase

Speaker: Andy Olen

| 00:02 | There’s a Sales Warrior Within each of us. My name is Andy Olen, and I’m here to help you discover and empower the sales warrior within. Hello everyone and welcome to another episode of the sales warrior within podcasts. This is Andy Olen coming to you both on podcasts and also live streaming on Instagram. So if you have Instagram ready to go @AndyOlen on Instagram is where you can always find me and I’ll keep trying to live simulcast these podcasts on Instagram as well.
| 00:35 | I hope everyone is doing well. You know, there was a Poll on Twitter earlier about Milwaukee weather and it asked, would you rather have two inches of rain in February or 20 inches of snow and I actually after going through two inches of rain that’s falling on like 5 inches of snow already on the ground and like forming ice and possibly backing up the downstairs basement and getting water in the basement. I think 20 inches of snow that would quickly melt away would be better than having two inches of rain.
| 01:06 | That’s a lot of rain. So hopefully everyone’s doing okay in the Milwaukee area after a lot of rain and whoever is going to get hit with this on the east coast or in the northeast good luck with it. Well that’s not what I wanted to talk about for the podcast today. What I want to talk about was some reactions to a book I just finished not too long ago called selling the price increase by Jeb Blount and I like jab quite a bit because he writes on very practical topics number one and number two his advice is just really applicable.
| 01:39 | And so you can go out right away and do what he’s suggesting and I think get pretty good and immediate feedback on it as well. And what I like about the book too is that at the end of each chapter there’s a really short exercise for those of you watching on Instagram or checking this out I’ll just show this to you. There’s a little worksheet that’s usually there at the end. That’s just really easy to put some thoughts together to reflect on things. And so it’s not only a good book in terms of practical advice, it’s a good book on actually how to get things done and do it right away.
| 02:12 | And I was thinking about price increases and let’s first talk about why increasing price is a really, really helpful thing. Let’s look at it purely from a financial perspective that every dollar of added price goes from the top line of your income statement and immediately flows all the way through to the bottom line. And that’s really good.
| 02:37 | So for all you financial people out there and those who have a good financial acumen when you add on new price or increased price on the top line you get the full benefit of that throughout the full P&L. And at many companies I used to work at before the leaders would say, all right, if you’re going to increase price, I’ll take 20 cents of every dollar you increase you and you get to spend the next 80 cents on new investments, Salesforce compensation, whatever it may be.
| 03:06 | So I think there are a lot of business leaders that would say if a Salesforce if a sales team can increase price that they would share the richness of that great execution with the sales team either in higher comp, higher rewards. And if you are paid on a if you are paid on a sales or revenue basis quota achievement variable incentive, the more you bring in through price also helps you achieve that higher pay.
| 03:35 | My good friend Irfan Hassan is out there always keeping my toes to the fire in terms of financial acumen. And yes, he’s right. He says only if cost is not increasing will the profit flow from top to bottom line. So I am assuming static costs in that that the cost of goods sold is not increasing. The expenses are not increasing as a result of that sales action in its purest form a dollar of new price should flow through. So why is also price increases important in this moment?
| 04:06 | Well, inflation is one of those drivers that may drive up the overall cost of your products, the cost of your services, the cost of hiring and retaining great sales talent as well. And so in order to offset inflationary actions or if the price of your products I’m looking at different products here on my desk I have my computer computer. Yes, I have my computer. I have my phone. I have some office supplies.
| 04:33 | If those costs are going up, then a price increase in my business will help offset some of those costs as well. So price increases are another way to offset a growing or inflationary cost structure that you may have in your business as well. So that’s helpful. And sometimes you’ll have heard in this higher inflation environment that we’re in right now that companies are going to push the cost of inflation off to their customers.
| 05:03 | For example, let me just take a company Johnson & Johnson, they make a lot of baby products and consumer goods. Baby powder, shampoos, other things like that, that if you’ve seen the price of these things go up, that may be a function of higher input costs. It costs more to make the shampoo. It costs more to make the baby products. And so Johnson & Johnson is going to increase price in order to try to just stay even in their income statement as well.
| 05:31 | So in an inflationary environment like we’re in right now, price increase may be really critical to preserve the overall financials of the business. What Blount talks about and what my experience has been is that it’s really challenging for salespeople to raise price. It is a perceived to be or maybe realized to be a very challenging conversation that a salesperson has with a customer.
| 05:58 | And I would say Blount says this too, that with great preparation, great positioning of the price increase, giving your customers the heads up that it’s coming, maybe setting their expectations a little higher than the price increase is going to happen. And then delivering below that. Or really what I found in my experiences, a price increase is a great opportunity to negotiate. And so what do I mean by that?
| 06:24 | Well, I remember sending out simple price increased letters multiple times in my career. When I was working at a company selling disposables, along with capital equipment, the price of the disposables would go up. We just send a letter to our customers and say, hey, it’s going to go up 5%. That’s a cost of inflation. Or our pricing is just changing. And customers will come back and say, well, I don’t want to spend 5% more on your stuff and then, okay, let’s work out a new deal.
| 06:54 | Let’s ask for more market share in lieu of giving that price increase. Let’s ask for a large, committed order instead of getting that price increase passed on. Or let’s figure out a little bit more market share that we can enjoy and sell into as a sales team as the company. And instead of a 5% increase, we’ll agree to a 3% increase. And for all the, you know, here’s the other thing is that when you just blanket and do a price increase across many customers, some will just accept it and say, I understand, that’s the way we do business.
| 07:27 | And all of a sudden, you just got a lot of new revenue with the very simple action of sending out a price increase letter. What Blount talks about in the book selling the price increase is have a strategy before that price announcement goes out. Have a plan where the salespeople are ready to really deliver the price increase and have it land well. Build up the salesperson’s confidence with role playing these conversations.
| 07:56 | And I think that’s a great tip for managers is don’t leave your territory managers or your salespeople out there doing this all on their own without any practice. It’s really important to get them ready to deliver the price increase message. Blount would say I would agree with this that you can do that well before the price increase comes. So for example, if you sell a product, that’s a $100 today. And the price increase is going to raise it 10% to a $110.
| 08:24 | You might want to go to the customer and say, we’re looking at a price increase somewhere between 5 and 20% and we’ll let you know more about it as it’s coming. I don’t want you to be surprised by it. It could be a $120. It could be a little bit lower. Want to give you the heads up. In terms of the ethics of that conversation, you’re giving the customer a range of possibilities and you’re also anchoring that customer at what the high water mark might be a $120. And when the price increase comes out at a 110, you can go back and say, hey, you know what?
| 08:54 | We were on the lower end of that range. This is a $110 price now. It’s a 10% increase, not the 20% customer might say, oh, I had budgeted for 20. I’m glad to see it’s only 10% now. And so you can see that if you are prepared and you start to condition the customers, prepare the soil prior to planting or delivering the seed of the price increase, then you’re gonna be in a much better position to actually execute on it.
| 09:23 | Sales teams and salespeople that are not given the tools, the practice, the insight, the transparency of why the company is doing it, they’re going to struggle a lot more. Just I’ll conclude by talking a little bit about the recommended actions for delivering a price increase. And that is one, get your sales team ready. So sales manager sales leaders get your sales team ready to deliver the price increase.
| 09:51 | Help them prepare and advance sales managers, role play with your salespeople, go through, throw some tough objections at your salespeople, work through those, and if they practice with you, they’re going to execute a heck of a lot better when the moment is critical with the customer. And third, and finally, just build up the salesperson and sales teams confidence to deliver.
| 10:14 | And you can do that by preparing the customer for a potential price increase, always being forthcoming, always being transparent about it, do not surprise customers, but build up your sales teams, confidence by delivering a great training delivering a great set of messages, a great set of role playing activities, get your team ready to do it.
| 10:40 | And then last and finally celebrate successes when you get that price increase and you see the goodness of it, share that with the team. Share that with the organization, sometimes people and salespeople just need to see it happen. They just need to know that it’s working and they’re going to jump all the way in on it, which is really cool. So price increases are great for the financials, great for sales comp, achievement of quota, and I believe it’s a great opportunity to continue to extend customer relationships.
| 11:09 | It doesn’t need to be seen as a battle with customers rather it’s an opportunity to effectively communicate with customers and to help your customers make really sound decisions and maybe even negotiate a much bigger program with them. It becomes a price increase notice can become a catalyst to actually doing more with a customer. So I encourage you to run into that opportunity with confidence rather than just being angry at the company that prices are going up and you have to be the bearer of bad news.
| 11:42 | Look at it as an opportunity. And all the goodness that flows from it on a job well done, I think will be very, very rewarding. So I highly recommend checking out the book selling the price increase by Jeb Blount. Here it is again for the folks watching in on Instagram. And it is a good, simple read again, about 250 pages. That sounds like a lot, but it’s a big font. With a lot of pictures, a lot of diagrams, which I know a salespeople, we like to get through chapter by chapter, what I really like about it is do the exercises at the end of each chapter.
| 12:14 | And I think that crystallizes Jeb’s main points and really brings home your readiness to go out there and execute. So good luck with price increases. Share with me how they’re going and good luck executing them and helping others on your team execute them as well. You’ve been listening to the sales warrior within. Thanks for everyone on Instagram for jumping in and checking out this out. And also for all of you listening in on the podcast podcast as well a podcast.
| 12:44 | The podcast as well. You can always reach me at Andy@andyolen.com and check out https://andyolen.com/ for more information about all the things I do for all my great clients out there. Looking forward to talking with you soon on the next episode of the Sales Warrior Within and in the meantime and as always my name is Andy Olen. Good selling. Good leading and good living.