Pricing Strategy: What’s Right and Wrong About Raising Prices?Editorial Team
It seems like prices for everything are soaring, especially with an inflation rate that hit 5.4% in June. Two issues are to blame: supply chain issues and labor shortages. So when it comes to adjusting your pricing strategy, how do you know if and when it’s time to raise prices? Also, how do you communicate these changes to your customers? In the second episode of Growth Hacks, Ramon discusses this with a team of experts.
After discussing hiring employees in the first episode, Kedma Ough and Loren Feldman return to cohost with Ramon. Kedma is an entrepreneur who wrote Target Funding. Then Loren was an editor at Forbes, New York Times, Inc.com.
Special guests were NetSuite’s Senior Director of Go-to-Market & Strategic Initiatives Matthew Rhodus and sales training expert Adrian Miller. They help discuss how consumerism has changed, how businesses should navigate pricing strategies now, and how to communicate price increases to customers.
Is it any harder or easier for smaller companies to raise their prices vs larger companies?
Kedma says that because of shortages, businesses are rethinking their supply chain and getting creative. They are flexible.
What about is it harder to raise prices for larger companies or smaller ones?
According to Loren, it’s harder for smaller companies. A lot of larger companies are changing their packages and raising prices. Smaller companies tend to be under-price already.
How do we explain this to our customers?
We have to raise our value. Given the changes in the environment, we have to change certain items and then explain. But sell on value.
Now if you can’t raise prices, that means you have a business problem. Think about it. If people want what you’re selling, they will pay more.
What trends are with NetSuite customers in regards to consumer behavior?
Matthew pointed out that convenience is more popular, like delivery apps, drive-thru, etc. Consumers can get goods when they want them. In the same light, consumers are also a lot more understanding. They know that the world is a different place. Losing a customer for life is not the case anymore.
He added that insane price add-ons, because of supply chain issues, are more understandable. However, you need to be more careful in the non-durable, consumable side. Nevertheless, the most important thing is to be transparent.
In the big picture, B2B sales are more used to fluctuating prices. Any change in behavior is more B2C, which is where you need to be more clear.
How do we coach our sales teams?
Adrian pointed out emphatically that the idea of raising prices isn’t new. We’ve always raised prices. Sales reps don’t need to shy away from pricing as long as they’re showing value. If prices are raised, customers want to see improvement and benefit. Don’t stutter or lack confidence when delivering the news. Be enthusiastic.
When it comes to consumer behavior, want rises above need. We need to press the want button, and the best way to find out is to ask customers directly.
Pricing Strategy Growth Hacks
The main tips discussed are listed below. You can also watch the live discussion in the next section.
- Think speed
- Prioritize convenience, safety, personalization
- Analyze consumer buying behavior
- Realize you may not have a choice
- Focus on advantages of raising prices
- Customers will likely understand
- Realize buying decisions are changing
- Communicate the value being offered