If you are planning a price increase, like many small business owners, you will have been agonising over this for months and have probably delayed the price increase far longer than you should have.
It has been a tough year for you and don’t be surprised if your staff are anxious about the customer reaction. You’re going to need to help them prepare for this both tactically and emotionally. Here’s how:
Step One: Once the decision is made to raise your prices, believe in it. Ensure you don’t pass any of your anxiety onto your staff. Be proud of your prices and the value you give. Exude confidence and be ready to pass this confidence onto your team.
Let them know:
- There is going to be a price increase
- How much it will be
- When it will occur
Convert their sabotage belief to a more helpful belief
In doing this, be aware that staff will often have misgivings about a price rise. These feelings can trigger a fight or flight response in them when customers make a negative or cynical comment about the price increase or even ask a question about it.
Fight – They jump in and defend the price increase ‘to the death’.
Flight – They feel like doing a runner and instead avoid eye contact with complaining customers and pretend they didn’t hear their comment.
Surrender – They join the other side. They agree with the customer that the price increase is unnecessary and over the top or they commiserate with the customer saying, “I know, everything is getting so expensive these days, isn’t it?”
These reactions are caused by a ‘sabotage belief’ about price increases. A belief that a price increase is a bad thing and customers will hate you for it. You can help your team develop a more ‘helpful belief’ such as, “It’s okay for customers to make negative or cynical comments about the price rise. When they do, it gives us the opportunity to reassure them that they are getting good value and to thank them for their custom.”
Winning over the team
Ideally get your team together as a group and, after letting them know about the price increase, ask them, “How do you think customers will react?”
As they explore this listen to their answers. Acknowledge their comments and misgivings.
Now, remind them of when your company’s last increase was and ask, “Can you think of anything else our customers would have bought that has gone up in price since then?”
Next ask, “Can you think of any of our costs that have gone up since we last had a price rise?”
Gather their examples.
If they don’t say it, mention salaries – then add other hidden business costs they may not have mentioned such as insurance premiums, superannuation, rates etc.
Stress that gathering this information isn’t so that they can defend the price rise by going into a detailed justification with customers. The reason for gathering this information is to develop a more ‘helpful belief’. It’s not about being defensive, it’s about reassurance.
- A defensive reaction is driven from our point of view.
- Reassurance is from the customer’s point of view.
Get them into their customers’ shoes by asking, “Why does the customer buy from us anyway?”
This discussion puts the focus on the positives associated with dealing with your organisation.
Encourage your team to take comfort in knowing that people dislike changing to an unknown supplier, venue or service provider as much as they dislike paying more. Intangibles like trust, reliability, knowledge of their requirements and personal service all add value.
Prepare and practice
The first step in this stage is to gather and record their thoughts on how to acknowledge and handle negative or cynical customer comments about the price rise.
Add your own and get agreement on what techniques and wording are likely to work best with different customer types and situations.
Next, have a fun, confidence building series of role plays where they take turns at being the customer and at being the service provider. In doing so practice:
- Acknowledging the customers comments
- Reassuring them that they’ve made the right decision in dealing with your company
Discuss with your team how it is going and monitor the customer reaction, particularly in the first few days following the price rise. It is vital that you make time for this. A bad reaction from one customer can have everyone on edge if you aren’t around to put it into perspective.
In most cases, the pricing becomes a non-event, with customers either not commenting on the price increase or not mentioning it again after their initial comments have been handled well.
Gather data on what effect the price rise is having on sales and profitability and share this with your team.
Congratulate them on handling the situation well. It will be a lesson learned for everyone about the importance of focusing on value rather than price.