Is it possible to double your price and not lose any customers? Yep.
If you’d asked me last year, I wouldn’t have believed it either. But that’s exactly what happened with one of our clients. In the end, our client’s revenue increased nearly $100M without losing customers. Here’s how we worked together to make this unbelievable situation a reality.
Determine Negative Elasticity
It started with an elasticity analysis. The client had marginally raised their price in the past, and our analysis showed something peculiar – negative elasticity. As price went up, so did volume. Competitive research further supported the analysis, as most of the competition had a higher price. Given the negative elasticity, our team recommended a price increase. But that was just the first step.
One might think the next step would be to train the sales team to deliver the price increase. Actually, that came later. Our research shows that the executive team is often the biggest culprit in marginalizing a large price increase of this nature. It’s critical that a business’ leadership team understand their value so they can defend it both internally and externally.
The key to understanding value, and then communicating it both internally and externally, is to speak with your customers. Our client spent time learning how their customers used their product, how it made their life easier, and how it enabled them to pass along a superior product to their customers. (In this case, it was B2B2B.) We then helped them quantify those benefits. Specifically, how much money did our client save their customers? And, how much did they increase their revenue? By quantifying the value our client delivered, it became clear a significant price increase was warranted and would likely be accepted by their customer base.
Incorporate Give Gets
The final step in the rollout was to prepare the sales team for what could be potentially difficult conversations. So, we taught them how to prepare a communications and negotiation plan that included Give-GetsSM and Negotiating with Backbone from Holden Advisors.
In short, Give-Gets help salespeople keep price and value aligned. If a customer demands a discount, the salesperson can accommodate the request, but only if an element of value is removed from the deal. In the case of our client, by preparing Give-Gets ahead of time, the sales team was ready to offer an alternative to a straight discount. This communications plan with the support of quantified value was tested with two customers, adjusted, and then readied for a broad rollout.
In most of the cases, customers initially balked at the price increase. However, when the sales team explained the value in quantified terms – terms that were meaningful to the customer, like how it would save and/or make them more money – many accepted the price increase. For those who didn’t, Give-Gets came into play. Once it was clear that value would increase in parallel with price, the customers accepted the new price.
In the end, the customers understood the value our client provided. And because of the price increase, our client netted an extra $100M in revenue.
I wasn’t ready to believe it when we started the project, but I’m a believer now: you really can double your price and retain all your customers.