NOTE FROM JEFF: We have a guest article today from my friend and colleague Jeb Blount, who just released an oustanding book this week: Selling the Price Increase. Here’s my challenge for you — decide how you can apply Jeb’s advice to your work in the form of higher commissions, better negotiating skills and higher rent/sales prices. Enjoy!
By Jeb Blount
When selling price increases, your mission is to maximize revenue AND retain your orders and customers. Still, no matter how you approach it, customers are not going to be thrilled about getting a price increase. Some of them will threaten to start buying from your competitor if you raise their prices. Therefore, your best defense for making your price increase stick without losing your customer is to make breaking up with you hard to do.
Leveraging the Status Quo Bias
The good news is that you have both physics and psychology on your side.
First, physics. Change is difficult because it takes lots of energy and effort to get a stationary object moving. In order to change, your customer must start from a standstill, expending time, resources, emotions, and energy to begin a search, unwind their relationship with you, and potentially disrupt their business.
So, even though their emotions may compel them to seek out an alternative when presented with your price increase, their emotional momentum more often than not comes to a stop at the hard reality of a cost/benefit analysis.
This brings us to psychology. Humans don’t like change. We actively work to avoid it. We stick to our routines and favorites. We live by the motto, “If it ain’t broke, don’t fix it.” When someone even suggests that a change might be made, we become anxious, cynical, and rebellious—even if that change is in our favor.
This natural bias toward keeping things status quo gives you a distinct advantage as the incumbent vendor. The status quo bias acts like a shield around your accounts that keeps competitors at bay.
Humans live with an underlying fear that change will make things worse. We are driven to avoid making irreversible decisions. When faced with options, we gravitate to the one that is perceived to carry the least risk.
In his book Thinking Fast and Slow, Daniel Kahneman, the father of heuristic and cognitive bias research, writes:
“Organisms that placed more urgency on avoiding threats than they did maximizing opportunities were more likely to pass on their genes. So, over time, the prospect of losses has become a more powerful motivator on your behavior than the promise of gains.”
When considering changing to your competitor, your customer’s brain is more focused on what could go wrong than what could go right. They worry that your competitors won’t live up to their glowing promises. That change will disrupt their business. That your competitor’s salespeople might be lying and attempting to manipulate them.
Why shouldn’t they? They’ve had bad experiences and disappointments with salespeople before. They may even remember the pain they went through the last time they went on a vendor search.
This emotional baggage is always there, tugging at them to avoid change. And because humans remember negative events far more vividly than positive ones, your customers believe that past negative events will be more likely to happen in the future.
Playing the Status Quo Card
The number one reason why customers stay with an incumbent vendor, even when presented with a significantly better deal from a competitor, is the fear of negative future consequences.
When you are actively managing your accounts, have invested in building relationships, and earned the trust of the account stakeholders, the status quo bias is the most powerful card you can play when buyers are threatening to go to a competitor. Use it to magnify every flaw, every risk, and every concern about your competitor to create doubt and uncertainty about the validity of their promises to cause your customer to think twice about change.
Be the Safest Choice
Customers tend to be attracted to safe choices. Therefore, if you want to amplify your customers’ status quo bias and build a wall around your accounts that keeps competitors out, all you need to do is make yourself and your company the safest option.
Jessica is a digital advertising sales rep. There are lots of companies that sell digital advertising, and there is nothing special or unique about Jessica’s offering. She and all her competitors are about the same. Except that we love working with her.
Since we pay by automatic monthly credit card billing, it would be easy for Jessica to forget about our account. Several of her competitors did just that in the past, which is how we ended up working with Jessica in the first place. Jessica checks in with us at least once a month:
- How are you doing?
- How can I help you?
- I noticed this campaign isn’t delivering. Let’s try something different.
- One of my other customers is having success with ________.
- Let’s switch up your keywords.
- What initiatives are you focused on next quarter?
There is nothing extraordinary about what she does. It’s exactly what most people would expect their account manager to do. She looks out for us, solves problems, and helps us win. Her regular engagement also makes us feel like our business matters and is appreciated.
Earlier this year, she scheduled a meeting to walk me through a pending price increase. I wasn’t happy about it and I briefly considered shopping our ad spend to her competition. In the end though, we were happy and it wasn’t worth the effort. Jessica gave us so much value that she’d more than earned the price increase.
Just Manage Your Accounts
Here’s the deal: The most effective way to get price increases without losing customers is to just manage your accounts. Let me say this again for the people in the back of the room who are still not tracking. Getting price increases AND keeping your customers is easy when you EARN IT by just doing your job.
Your job is to diligently invest in the relationships, take care of your customers, and proactively focus on solving problems. Problem solvers are the champions of the business world.
When you actively and consistently solve problems, customers view you as a resource they can’t live without. They will even pull you into planning and strategic meetings to get your opinions, giving even more influence over their future buying decisions.
The good news is that your customers have problems, and the more problems you solve, the more they’ll love you. Solving problems is about helping your customers get what they want. When you help your customers get what they want, they will be more willing to accept the price increases you want.
When you actively and systematically manage your accounts, your competitors won’t stand a chance because breaking up with you will be very hard to do.
[You can learn more about Jeb Blount at SalesGravy.com]