Selling the Price Increase

28Protect the Points

In a price increase negotiation, your customer's intent will be to reduce the size of the price increase. On the other side of the table, your imperative is to protect your price increase percentage points.

You learned at the beginning of this book that a 1 percent increase in price, when sales volume remains stable, delivers an 11.1 percent increase in operating profit.¹ Giving away even a single percentage point can have a massive negative impact on profits.

As an example, giving up one point of a price increase on $100,000 costs you $60,000 in profits over five years. Multiply that over many reps and customers and all those points that are given away add up and become a significant, negative hit to the health of your organization, and potentially your paycheck.

Yet, when negotiating a price increase, it is super easy to give away percentage points. When you are asking for a 10 percent increase, it doesn't seem like that big of a deal to reduce it to 5 percent just to make your customer happy and avoid any further conflict. You think, “I still got the price increase, and 5 percent is better than nothing.”

The problem is, you reduced the impact of the price increase by a whopping 50 percent. To put this in context, consider the implications to you and your family if your paycheck was suddenly cut in half. When you cave early and take the path of least resistance to an agreement, you are more likely to leave your price increase points and profits on the ...