This is Day 4 of the key account conundrums, and I’ve had some great feedback. This one is close to my heart having had 100s of interactions with procurement. They’re a great bunch of people but some can be brutal.
I wrote a well-received post on negotiation some weeks ago called Do we have to talk about price this will help you on the skill and engagement side when speaking with procurement.
This question comes from James in the UK who had some real challenges with procurement. He asked
What do you do when you have legacy pricing agreements and the deal is no longer as profitable?
James isn't alone. Pricing can be tricky if a long term perspective isn't taken or if you choose not to build the pricing agreement to fit your present and potential future costs.
Before James went in guns blazing like in the Godfather with an offer his client could refuse.I wanted to help by offering three thoughts. I've shared what I did with James below. I'm sure you can utilise one of these ideas if you’re ever in a situation wanting to raise rates with your clients.
Your client doesn't care about your costs
Sounds harsh but it's true. If you are in the position wanting to raise rates. Don't make the mistake I've seen of leading with your agenda. Take a step back and ask yourself the question"what does my customer care about in this relationship? with this deal they have? in the solution we're providing? the moment you gain clarity on this you can begin to frame a practical and emotional context around your clients potential reaction. Leading with what they care about will surprise them and create a more open environment for discussion.
Be honest, direct and value focused
In the context of legacy deals sometimes the person sitting at the table or over the phone with you wont know the history. If they do you'll hopefully have clearly documented accounts of this. If not it's not a deal breaker. The next thing I'll share must be true for you and if it is then great. If not then you will need to think of would need to be for you to share this with your client. Mention the package at time of purchase was for a fixed time and you're really pleased your client got a lot of value from it. That package will end at X date as your business is moving on with even better services to increase the success they're already seeing with you. You'd like to discuss those options and see in this new phase what new package might be best for them. If the end date or new value is not true for you then you to find an honest/value focused way to position the change. There is nothing wrong with simply saying the rates will be going up. I'm always an advocate of using every conversation to deepen relationships with your client and this is one way to do that.
Be prepared to be incremental and raise rates slowly over time
Sometimes you'll have to be patient for profitability. If you find yourself in a more challenge or complex situation of raising prices. Having a plan for incremental increase in pricing or rates will help. This could be done collaboratively with your client. I recognise every relationship and situation will be different. The point of practicing incremental pricing is it does two things. It allows you and your client to work out budget implications upfront so you can forecast better and in some cases allows you to build in greater profitability in the long run if there are already planned incremental increases. The best way to do this is half yearly so avoid potential impact on quarterly sales.
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