Tips to Increase Prices without Losing Customers in B2B
Price increase is a part of every business’s growth. According to Bain & Company’s global survey, most companies call pricing a high priority, but 85% say they have significant room for improvement in pricing. When a price increase occurs, the way your customers react differs from one industry to another.
B2C sector: Let’s say a customer buys a t-shirt from Amazon. Their payment is one-time and there’s not going to be any price increase during their purchase. The only way the t-shirt’s price could increase is after the holiday season. Still, the customer gets to decide whether to buy it or not for a higher price. Hence, not much of a problem.
B2B sector: Consider a company that has signed up for an online tool. They take up the yearly subscription as the product is easy to use and fits their budget. They train their workforce to use the product as they plan to include the tool in their business. But, a price increase is something they didn’t sign up for. It impacts their yearly budget and even if they plan to cancel the subscription, a new product means more budget and more training. Now, such a customer has every right to be frustrated.
This is why B2B businesses need to be extremely careful when implementing a price increase. There are two ways you can do it:
– Continue with the old pricing for existing customer accounts and charge the increased price to new signups. This way, an existing customer will be charged based on new pricing only if they move to a different plan.
– Carry out a full-fledged price increase for both new and existing customers
While the first method is a safer way out, it’s the second method that widens the scope in terms of revenue. If you are a B2B business looking to hike the price for all of your customers, this is just the right article for you.
4 Important Things to Do Before a B2B Price Increase
In order for you to soften the blow during price hike, your prime focus should be on putting together a successful strategy failing to do which would lead to massive customer churn and even a dent on your brand. Here’s a step-by-step plan.
1. Begin With Internal Communication
Before announcing the price increase to your customers, your internal teams must be convinced of it — especially the customer-facing teams like customer success, sales and customer support. This is because they are the ones who converse with customers and it’s necessary that they know the reason.
“Every GTM (go-to-market) person is emotional about their customer. If I’m a sales guy and there is a customer whom I onboarded, then he’s special for me. Since I closed the deal, I have a special relationship with the customer. Without myself knowing the reason behind the price increase, how am I going to communicate it to the customer?”
– Vipin Thomas, Customer Success Manager at Freshworks
So, how exactly do you convince them?
A price hike is only fair when the product gives increased value to the customers than before. So, get the reason behind your pricing model right. That’s what Dan Turchin said when he was the VP of Growth Strategy at Big Panda:
“The goal behind any pricing model is to achieve a fair value exchange. What’s driving our process is not revenue maximization per se, it genuinely is a spirit of partnership and trying to figure out what is the right balance and what features are unlocking the right value.”
2. Maintain a Strong Customer Support Team
When prices increase, the first person every customer tries to contact is the support team. Or worse, the customers share their dissatisfaction over social media, thus bringing a bad reputation to your company. Here’s where your support team should be equipped to prevent the price increase from turning into a social media crisis. Ensure that you provide them with clear documentation at least three months before the price increase. In addition to this, your support team has another role to play here.
Why do you think customers choose your B2B tool when there are free options almost as good as yours?
It is natural to run into issues when using a product no matter how good it is. In such situations, one can’t expect a 24/7 customer support from a free tool. They would either have to Google their solutions or wait for days to get a reply from customer support.
On the other hand, customers are willing to pay a business that offers a great product along with dedicated support. In fact, if you look at any RFP (Request For Proposal) when a brand evaluates your product, customer support would definitely be a requirement.
That’s why it is crucial for your support team to win over customers by providing a superior post-sales experience. By instantly helping out a customer when they are in trouble, they add value to the product in the long run. This, in turn, has significant influence over a customer’s decision during the price increase. They would be hesitant to churn considering the great B2B customer service they receive.
3. Communicate the Price Increase Well in Advance
When customers sign up for your product or service, they don’t enroll for any price increase. Thus, it is your responsibility as an organization to inform your existing customers beforehand if at all there’s a price increase. If you think that a fortnight is enough, you are doing a terrible mistake. It is like forcing them to pay more than what they had initially signed up for. And that, for your customer, translates to cheating. Inform them so that they have at least a month to evaluate your price increase.It’s rude to communicate sensitive information such as price increase to your customers just over email. Make sure you call them too. Click To Tweet
Also, getting the account manager to talk to the customers they onboarded can be of great help. There’s at least a chance for the customer to grudgingly appreciate the salesperson for having the courtesy to tell the situation beforehand.
4. Be Ready With a Workaround Plan
Even though you have implemented all the above steps, some of your existing customers still won’t in a position to accept your price increase. Your agent would have talked in length to the customer about the additional value but to no improvement. In these situations, have an alternative plan ready for them. These customers have been with you for some time and it’s essential that you offer them a workaround. If you are wondering what to do, take a look at these options for inspiration.
– Provide a feature or add-on from the higher plan for new pricing
– Ask if you can make up for the new pricing through managed services like weekly reports, data sync updates, server management, etc.
– Do the usual. Offer a discount
Even when executed well, price increase is an extremely daunting task for B2B companies. You need to make sure that your existing customers are persuaded of the new pricing and the value they obtain out of it. Once you inform your internal teams, get your support team ready. After everything’s set, call your customers to inform and be ready with a counter plan if needed. It is normal for customers to get pissed of which is why your teams should be ready in advance.