3 tips for negotiating price increases

Over the past few months, we've seen a number of large organisations such as Unilever and Apple make significant price increases to their products. Brexit has weakened the pound thus pushing up import costs and so businesses are having to decide whether they absorb the cost, pass it onto their customers, or a bit of both.

Here are 3 tips on negotiating price increases

1) Give plenty of notice

Your customers don't appreciate nasty surprises, so give them plenty of notice that there's a price increase coming. This won't eliminate objections necessarily, but it gives them time to move from problem mindset to solution mindset. Drip feed significant pieces of information about the market to your counterpart periodically and keep them in the loop. For example, if the cost of raw materials goes up, a timely press release will condition the market to expect subsequent changes in the cost of goods.

2) Empathise but don't sympathise

What's the difference? Empathetic behaviour shows that we feel the other person's pain and we understand why they feel the way they do. Sympathising on the other hand also communicates that you believe they are right. This latter behaviour reveals that you don't truly believe in your price increase. If the other party senses this, they will exploit the situation in their favour. Be confident and assertive in explaining the reason for the price increase, but beware of making excuses and weak justifications.

3) Don't assume it's all about price

Under what circumstances is a price increase acceptable? That depends of course on what the other party values most. For example, your customer may be able to live with a 4% price increase on the condition that you can extend payment terms by 7 days. The more negotiable variables you have at your disposal the more flexibility you have to negotiate with your counterpart. Look for opportunities to build value with your customer rather than distributing value by restricting the terms of trade.