Ask the Experts | How to Raise Your Prices

Question: I want to raise my prices before it gets busy, but I’m nervous. How can I execute a price raise and get my homeowners to be ok with it?

Weldon Long; Sales Expert and NY Times Bestselling Author:

Well, to quote the brilliant and infamous Drew Cameron, the answer is sometimes within the question. If you want to raise you price before it gets busy but you’re nervous, that’s the key right there. My guess is that you’re more concerned about a price increase than your customers.

People think that our customers have our prices and our flat rate pricing guide programed in their head. But people don’t really know. Every time you meet with a customer, they’re not comparing it to what you charged last time, they’re going to compare the value of what you’re recommending to the value of the dollars in their pocket.

It’s about what you are asking for in that situation, they’re not comparing you to two or three visits ago. So, if you raise your prices, the bottom line is you just have to be prepared to do a better job of explaining and communicating the value of what you’re doing to justify that price. But you have to do that even with the lower prices, so my guess is that the biggest challenge to raising the prices here is that our fear of raising the prices are irrational.

I just went through a situation with a client last year and they have been wanting to raise prices for two years and they needed to because they had several price increases from their manufacturer and they had not raised their prices to offset the overhead. As part of my consulting service, my assignment was to implement a 15% price increase.

The first thing that I did was I found a way to incentivize the sales team to be more willing to accept this price increase. For the first 90 days of the price increase, half of that 15% increase went to the comfort consultants.

If a system that would have sold for $10,000 is now $11,500, then what’s going to happen is that they received their regular commission at the $10,000 then they got half of the $1,500 price increase. So, they basically doubled their commission. If their commission is 700 or 800 on the first 10,000, they get $750 of the $1,500.

Of course, when I rolled it out, the sales people got so freaking excited – by the way, this was last fall right coming into Christmas – that they didn’t really have a problem with the price increase. And when the comfort advisors were okay with it, guess who else was okay with it? The homeowners are okay with it!

Now yes, we got back to sales basics and I told the guys we had to justify our price no matter what it is. We had to really make sure that were communicating the value proposition, why we do a great job, how we do great installation. By the time we got to the end of December and that incentive program changed, they were all so comfortable selling those prices that it was no big deal going into the first of the year.

So, my instinct is that the objection to the price increase is way bigger in our head than our customers. Your customers don’t know what you charge. You’re going to have to justify whatever your price is every time you go in. In other words, you’re never going to be able to go in and say, “Mr. homeowner, this is an igniter. We charge $235 for it and that’s what we’ve charged for it for five years.” You’re still going to have to justify why you charge $235 for it.

So, if you raise that to $265, you have to justify the same way you would at $235. 99% of the problem is in our own head around our own misconceptions, our own fears, our own preconceptions, our own heightened expectations of pushback from the homeowner. Your homeowners don’t remember how much you charged them two years ago, they just remember how you made them feel. Do you make them feel that you’re worth the $235 or that you’re worth $265?

The fear is in your head. So, take a deep breath. If you think you need to raise your prices, then raise your prices. By the way, you have a report card. It’s called your financial statement. If your financial statement says that you’re not making enough money and your gross margins aren’t what they should be, you can’t afford to not raise your prices. Quit dragging it out. Take a deep breath and do it. Just go in there and deliver more value. If you think you’re worth the increased price, your customers will too!

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