Communicating Price Increases to Your Customers Without Losing Business

February 17, 2016

This post originally appeared on INSIGHT2PROFIT.com

Recently, INSIGHT2PROFIT worked with a manufacturer that had not executed a price increase in nearly three years. There had been individual negotiations, but overall, pricing had remained relatively flat. While the company was a market leader, it was ignoring the pricing lever for profitability.

Our team worked with theirs to determine a plan for strategic price increases, as well as a process for conditioning customers to expect those increases. Here are the steps we took, which you can utilize to ensure your own success in communicating price increases to your customers without losing business.

Step 1: Start Addressing the Issue Informally First

You know sales is all about building relationships, so leverage yours. Instead of waiting for a letter to be sent to everybody, which does not make anyone feel like a priority, start reaching out. Whether it is over the phone or over lunch, start the conversation: “I wanted to let you know we are looking at a pricing initiative to better reflect the value our organization is providing.”

The more you can do to ensure your customers are not surprised with a price increase, the more successful you will be. Taking that a step further, developing a cadence for price increases can help guarantee pricing excellence: Communicating with your customers to an extent that they expect a price increase every year or six months (or whatever period fits your business model), the conversation shifts from “why are you raising prices?” to “what is the price increase?”

Step 2: Create Supporting Documentation

Given that it had been several years before the organization’s sales team had gone before a customer and said, “We’re going to raise our prices,” INSIGHT2PROFIT helped to build an extensive communication package. It covered a draft of the letter that would communicate the change to customers, as well as a sales script and FAQs personnel could use to combat concerns.

The purpose was not for reps to read the script or answers word-for-word, but rather to instill confidence in their responses. When the sales team used their own wording but projected the agreed upon message, fewer customers questioned the change.

Step 3: Role Play, Role Play, Role Play

If you have not completed a price increase in a number of years, you haven’t had that difficult conversation in a long time, and it can be hard to handle. That is why we insisted on a lot of role-playing with the company’s customer-facing staff members.

We got them into the room and said, “I’m the purchasing manager, you are the sales rep. Tell me why I’m getting an increase,” and they practiced. The first round was less than ideal. By the third iteration, the team had gained confidence and were incredibly convincing. Several of the staff told us how powerful the preparation was and that they knew exactly what to say when faced with an unhappy customer. Ultimately, they were confident enough to go into the marketplace and deliver the increase.

When practicing with your team, cover these bases:

  • Read through the sales scripts, encouraging staff to use their own words
  • Role play questions and answers
  • Reiterate selling based on value, not price

After doing so, our client began getting 90 percent of what they asked for when, in the past, they historically achieved just 50 percent of their ask.

Step 4: Don’t Back Down

Continuing to educate and condition customers regarding your pricing initiatives is just as important as training your staff. The first time you cave when a customer pushes back, threatening to take their business elsewhere, you have set a precedent that will ultimately set your pricing initiative up for failure.

Think of it like giving in to a child because they were crying after being told “no.” If you roll prices back even once, you have taught your customer not to take your increases seriously. The better behavior is to remain respectful and professional while sticking to the increase.

There is obviously risk, and you may even lose a small amount of business. But we believe the bigger risk is backing off and setting a precedent for price locks.

The Bottom Line

While every industry’s preferred communication and tolerance for price increases differ, we often favor open communication, stating your case for value. Price increases do not need to be scary. To begin raising prices fearlessly, get our free eBook, “B2B Pricing Without Fear” by clicking here.


Seven Things to Do with a Database of U.S. Vocational Education Programs

February 9, 2016

By Rachel Kerstetter, PR Architect, Sonnhalter

974_4338603We did the legwork to identify more than 20,000 vocational programs at schools all across the United States, so that you don’t have to. All you have to do is download it.

But once you’ve downloaded the Excel spreadsheet, what can you do with it?

Here are seven different ways you can use our database:

  1. Build your network. Locate the programs in your area, and connect with the folks that run them. You never know when having a connection in those training programs could be beneficial.
  2. Become a resource for them. Whether it’s offering to send someone from your organization to speak to a class or volunteering to host a facility tour, the next generation of tradespeople won’t be able to be trained properly without support from the industry.
  3. Hire their students. Use the programs in your area as places to recruit skilled employees, co-ops, interns or apprentices.
  4. Supply them. If you offer a product or service that’s of use in a training program, supply these programs either through donations of your products or heavily discounted equipment, students will be more likely to use the equipment they’re familiar with from school once they get into the workforce. This grassroots strategy has long-term benefits; an ongoing relationship with a vo-ed program will provide exposure for you for each new class.
  5. Learn them. Get to know the next generation better. Millennials as a generation seem to frighten marketers and managers, but there’s no reason to be scared. Millennials are bright, technologically inclined and learn quickly; the sooner you engage with this young talent, the better.
  6. Get your distributors involved. Your distribution network can amplify your efforts to combat the skills gap. They can reach into areas far from your headquarters and help train the next generation.
  7. Share. Please share our list with anyone that it may help, whether it’s a colleague in the industry or someone who is looking for a rewarding career path.

It will take teamwork and effective communication to help close the skills gap that the industry is facing. Support for vocational training programs is crucial, and it should come from those within the industry. This list is just one tool that can help facilitate those efforts.

Visit sonnhalter.com/vocational to download the database and get started.

And of course, don’t hesitate to contact us if you need help getting started.


What is the State of the Manufacturing Economy?

February 3, 2016

By Miles Free of PMPA. This post originally appears on pmpaspeakingofprecision.com and is reposted with permission.

Today our growth is limited by our inability to acquire skilled workers. In the last recession, we were held back by lack of demand for our customer’s end products. Today, we cannot find the skilled people that we require to operate new high tech equipment that is needed to make the high precision parts we produce. 

Our shops are tackling this issue in a number of ways. Some are setting up internal training programs, some apprenticeships.  Several of our member companies are creating on-site schools to teach skills needed. As an industry we helped to create, and are supporting initiatives like Right Skills Now. Right Skills Now uses National Institute for Metalworking Skills (NIMS) credentials to create the skilled workforce that manufacturers require to remain competitive in today’s global markets.

Claim: The President had this to say about employment and manufacturing:

More than 14 million new jobs; the strongest two years of job growth since the ’90s; an unemployment rate cut in half. Our auto industry just had its best year ever. Manufacturing has created nearly 900,000 new jobs in the past six years. And we’ve done all this while cutting our deficits by almost three-quarters. We’ve launched next-generation manufacturing hubs, and online tools that give an entrepreneur everything he or she needs to start a business in a single day.”

Response: We haven’t won this one yet.

“…there has been a gain of 878,000 jobs since February 2010. But Bureau of Labor Statistics data show that the number of manufacturing jobs is still 230,000 fewer than…in the depths of the recession — and 1.4 million fewer than when the recession began in December 2007. Indeed, the United States only gained 30,000 manufacturing jobs in all of 2015.” – Washington Post

Question: Why do we have a skilled workforce shortage when we are at the lowest labor participation rate in ten years?

Work yet to be done on unemployment

Regulatory Hostility Read the rest of this entry »


Mobile Marketing Continues to Grow in Workplace

January 19, 2016

By John Sonnhalter, Rainmaker Journeyman, Sonnhalter

According to a recent post in eMarketer.com, mobile is continuing to grow in the workplace. In 2014, the average non voice time U.S. adults spent on mobile devices surpassed that of desktops and laptops for the first time.

And by 2017, eMarketer.com estimates that mobile usage will increase to more than an hour a day more than desktops or laptops. This should come as no surprise to us. The next time you’re in a meeting, look around the room and see how many mobile devices are there and how many times those individuals check their devices during the course of the meeting.

So what does this mean for manufacturers who are trying to reach the professional tradesman? It means if you don’t currently have a mobile strategy, you better develop one soon! Here some areas you need to focus on:

Mobile Marketing Tactics Used by B2B Marketers Worldwide, May 2015 (% of respondents)

LinkedIn, a leading BtoB social media tool, reports that 55% of all its traffic is coming from mobile in the last part of 2015. Google reported that in the U.S., more than 50% of all searches were made on mobile devices .

Similar estimates for mobile use: Facebook (58%) and Twitter (90%) are forecasted by the end of 2016.

Mobile is here to stay and we need to recognize that these are new challenges for our workforces.


Managing Pricing Exceptions in Sales: Employing the 80/20 Rule

January 13, 2016

This post originally appeared on INSIGHT2PROFIT.com

It’s a common knee-jerk reaction for salespeople to focus on increasing volume by offering discounts on every sale – even if it means sacrificing margins. One way to mitigate the risk of excessive discounting is to establish a pricing system that balances volume incentives with well-defined boundaries that sales staff must operate within.

Ideally, in an effective pricing system, the framework should provide guidance for as many as 80 percent of sales. This guidance should consider a comprehensive range of factors, including the type and size of the customer, the market and the nature of the opportunity. The direction should be clear and unequivocal, providing sales staff with “guardrails” that establish minimum and maximum prices or margins. Sales staff can bounce between these guardrails as appropriate, but they should not be allowed to go above or below the established boundaries.

For the other 20 percent of sales, be prepared to manage the pricing exceptions. For these outliers, the framework allows pricing managers to enter the conversation and work with the sales staff and perhaps even the financial team to develop a strategic price appropriate for a specific situation.

By limiting exceptions to no more than 20 percent of the time, you’ll be able to equalize the competing interests of volume versus margin far better than a one-size-fits-all pricing system. Sales staff will still have the flexibility to manage the majority of sales on their own, allowing them to meet the needs of specific customers as well as their own particular quota goals. But the boundaries you set will prevent those individual goals from overriding your company’s high-level goals.

Every business is different, so the 80/20 framework that’s right for your organization will depend on the type of selling you do. If your business is list-price driven, your pricing system may be able to accommodate higher volume incentives. If you’re in a business where price is highly customized, then your framework may need a more aggressive margin component. Implementing this system may take some time, as well. Achieving the right balance of guidance and exceptions is a process that often requires fine tuning. It also requires an extensive amount of data and knowledge in order to put together a sustainable system that produces actionable, accurate and real-time insights.

Whatever the framework you decide upon, the 80/20 structure will provide sales staff with the latitude they desire, while protecting the profit margins your organization needs.

For more details on how to develop guard rails for your team and establish an 80/20 structure, check out this article.


Happy Holidays!

December 23, 2015

We’ll be taking some time off and will be back after the first of the year. Enjoy the Holidays with your Family.

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4 Ways manufacturers Can Gain Better Pricing Data Visualization

December 16, 2015

This post originally appeared on INSIGHT2PROFIT.com

Pricing data can be dense. If no one is reviewing it, managing it, comparing it or scrutinizing it, it’s likely your organization is missing price leaks you could otherwise put a stop to. From volume discounts to price overrides, profits are lost and margins are cut, but do you know by how much? Can you identify your true pocket price for your top selling products?

If not, you may have a data visualization problem. But like any problem, a solution exists, you just have to seek it out. Here are four ways to gain better visualization into your organization’s pricing data.

1. Establish Pricing Ownership:

In most manufacturing businesses, pricing is a responsibility divided amongst marketing, sales, finance, product teams and other executives. But whose job is it to see the big picture? If you can’t validate hiring a pricing manager, you can develop a Pricing Ownership Matrix.

In a decentralized customer environment where no pricing leader is appointed, you can define pricing area ownership. Consider catalog and list pricing, discounting, key accounts, geography and business divisions.

Then ensure these “area owners” meet often to talk about the big picture of pricing.

2. Search Out Discounting Visibility:

Do you know how many discounts your sales team is offering? How about your customer service team? From freight and volume discounts to rebates and “long-time customer” pricing, the hits to your margins add up.

Obtaining clear visibility to your discounting structure through a Pricing Waterfall is a powerful way to determine pricing leaks and non-value added discounts. Discover how to determine your true pocket price in the this 1-minute video.

3. Determine Product Value:

Your organization deserves to be paid for the value it creates. But do you know which products create the most value for your company?

Most businesses focus on getting the price they set for each product, but are often disappointed when customers won’t agree to it. More important than “getting the price” is balancing what the right price is.

Some products won’t create a lot of value for the brand—perhaps they are not differentiated enough when compared to the competition. Those products will fetch a lower margin. Other products may create a lot of value; they may be highly differentiated or solve a problem your competitors can’t. Higher margins can be sustained, bringing in higher revenues.

Once you determine and utilize this information, your pricing strategy can become far more sophisticated.

4. Utilize Technology:

If you are using an outdated ERP system or BI tool, you may not be seeing the entire pricing picture. While you can track list price and invoice price, what about analyzing pricing and mix analysis? Without actionable information from your tools, how will you identify outliers, see pricing variations among peer groups or be immediately alerted to pricing variances?

While there is power in your data, you must utilize the proper pricing application to discover that power. To truly visualize your pricing data in the most efficient manner, you need a pricing application that can stop price leaks before they become dangerous to your bottom line, predict customer churn and identify the root causes of profitability issues.

The Bottom Line

By establishing pricing ownership, seeking discount visibility, determining product value and utilizing technology, you can gain the pricing data visualization you truly need. In fact, one manufacturer worked with INSIGHT2PROFIT to gain better visualization and was able to realize an additional $2.3 million in revenue over 16 months. Learn more in our case study.


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