Every B2B business at one point or another needs to ask itself the question” are we charging optimal prices that will help generate the maximum profits for my retail sales?”
The thing is, manipulation of price upwards (or sometimes downwards) offers great potential for increased profits. That’s why it is important to know the effect it will have on sales in order to make the right move at the right amount.
For example, if a slight reduction in the price results in an increase in sales, then it may be worthwhile. Now, it might not matter much to B2C customers but these small price differences add up to make a huge impact on wholesale ecommerce customers.
An efficient pricing methodology, therefore, is one of the important means by which B2B customers compare products and services with those of the competition. It becomes even more important when you have to run against wholesalers and distributors from all around the world. Having said that, let’s understand some of the:
Basic factors that prompt one to raise the price for their customers
The profit factor
When it comes to raising the price, you need to answer one fundamental question; how much profit do you want to earn for each product that you make? Successful B2B businesses that you see around you are generally those with a pricing structure that helps them amplify their profits per product and per customer.
The quality factor
Just remember, your B2B clients who want to buy from you only because you are the lowest cost provider will treat you as such. But when you switch to premium prices and position yourself as the best at what you offer, you will attract clients who value that unique offering.
The value factor
If you show your clients that you can do anything in order to get the sales, including lowering your prices, it will give them a false assumption that they are in control of this B2B relationship. Believe us, this will not reflect well for your business.
But when you charge premium prices for your specific and defined services and are unwilling to budge on what you’re worth, you will gain tremendous respect in your community.
The resulting factor
Lastly, what you are offering to your B2B business clients in return for raising prices? If you continue to charge the existing low price, your clients will easily give up on you if some other company offers them the same deal but at lower prices.
The thing is when clients pay more than what they used to, to work with you, their expectations increase. And with it, increase the chances of them sticking with the process long enough to get the results.
So you see, raising the price comes with its own set of benefits. But you being okay with the price increase doesn’t mean your customers will feel the same way too.
So, what should you do?
Questions to ask yourself before planning the price increase strategy
Does the buyer take your product and add a standard percentage increase in price when selling to their customers?
If such is the case, you need to explain to your customers while revealing the raised price that they stand a much better chance of earning more money by taking a standard percentage of a higher amount.
What percentage of the customer’s business is your product?
But in case the percentage is high?
Tell them how you have done everything in your power to contain the prices and how this hike is necessary for maintaining the quality standards.
Have other vendors also increased the price for your customer?
If yes, find out what is the percentage of the increase made by others. If yours is low, point out how your raised prices are still low compared to other ecommerce vendors.
What if the percentage is high?
In case it is high, you can emphasize how your price is the only one you expect to work. Also, tell them how you wouldn’t be surprised if others come back for another round of raised prices.
How does the buyer view you and the merchandise you sell?
If your reputation is good in the market, then you don’t have to worry about the price hike. You can easily persuade them how the increase has been carefully thought through and is another step to ensure quality.
But what to do if you have a shady reputation among your B2B business customers?
Well, in that case, try to improve it. But, for now, point out how this increase will help you address some of the issues in question. Just make sure to follow-through all the commitments that you make.
Is it possible that the customer might raise an issue with the price increase?
If this happens, prepare all the documents that prove how your costs have escalated and how other companies are experiencing the same hikes.
Also, while having this discussion, make sure to show empathy for your ecommerce customer but stay firm on your words. Do not let the customer see any hesitation on your part or you will risk exploitation in the form of a price concession from you.
And most importantly, do not forget to mention the steps your company has taken in order to prevent this price increase. Emphasize how this is the only way to maintain the level of quality and service your customer expects from you.
Think about why the customer wants to buy from you anyway?
Now, the answer to this question varies from retailer to retailer and customer to customer. Make sure to give this question some serious thought. Because the answer to this will help you reinforce the points while talking about the price increase.
Besides this, prepare at least a couple of key needs of the B2B business customer that you satisfy with the help of your products or services. But whatever you do, update all of your strategic information about the customer before announcing the price increase.
How much of your business is at risk from the customer?
The biggest fear every wholesaler has while increasing the price of their products or services is that they will lose the majority of their customers.
Let us tell you a secret; this fear is completely baseless.
But if you are still having doubts, just think of the steps your customer would have to take in order to move to another ecommerce vendor. Nobody likes to complicate things on purpose.
Generally, the work involved in finding and migrating to is not worth the effort. So, be assured that you are at a much lower risk of losing your customers than you thought.
Whats and what's not to do while communicating a price increase
So, now that you have the strategy mapped out, its time to introduce price increase to your existing customers. To help, let’s look at some of the tips to keep in mind when you are going to break this news to them without risking your B2B business.
Give your customers some lead time
Even for your own ease, some lead time is necessary before raising the prices. Make sure to review the contracts during this time to ensure that you are not taking steps outside the agreement.
It is a wise move and will be seen as such that you’re not pulling the rug from below them. Allow them enough time to place at least one more order at the existing price.
Do not favour one customer over another
This is a big no-no at all times but especially during an ecommerce price hike. Maintain price integrity and treat every single customer of yours equally.
Now, you can exercise different pricing levels but in that case, be prepared to defend that because the customer who is not the price break might not understand and accept the price change so easily.
Inform about the price increase yourself rather letting your invoice tell them
Never make this mistake. Any information regarding the price change should come either from the owner himself or a person of high position within the company. Notify every person involved with your B2B business company personally and only then make it appear on an invoice.
Inform your customer support team well in advance about when the price increase will take place
Do not take this lightly as there’s nothing more confusing to a customer than different departments sharing conflicting information regarding the price.
Also, do not limit your staff with the price hike alone, inform them of the reasons behind it along with the logistics for implementation.
If possible, provide them with an FAQ guide so as to help them share the correct information whenever a customer enquiries about the raised prices.
Stand firm by your decision
As we have mentioned earlier, believe that the ecommerce price you have increased is worth every penny. Just remember, if you wish to be paid what you are worth, you will have to charge accordingly.
We understand that this is not something you can communicate explicitly with your customer but then, this is something that will set your B2B website apart from the competition.
Send a strong signal to your customers
Informing your customers is not only the job of the customer service executives but senior-level executives too. Encourage them not only to answer phone calls from B2B business customers regarding such enquiries but also to make phone calls on their own to key customers.
Believe us, seeing your company’s top executives on the front line will be a sight to behold.
A Tip: Make sure to monitor the sales patterns of your individual customers both before and after the price increase. This way, you can quickly catch any changes that might occur because of this price hike and make the arrangements accordingly.
It doesn’t matter how well you have thought this through, raising the price for your existing ecommerce customers is an extremely daunting task. Keep a close eye on details while executing the plan, inform your internal teams in advance, get your support team ready and when you are certain that everything is good, only then inform your customers about the price increase.
So, what do you think? Will these tips help you introduce a price increase without scaring away your B2B clients? Well, we hope it does. Meanwhile, if you have any more queries regarding the B2B sales, check out our other blogs at StoreHippo.
And in case, you are looking for a complete website makeover to assist your B2B business customers better in exchange for the raised prices, contact us.
Book a free demo with us and find out how we excel in offering a better user experience to your customers.