Is Pricing Making You Go Bananas?

Let’s face it. The CFO is always the first to suggest raising prices.

And we in sales and marketing aren’t always willing to stand up and salute. We really want any other solution besides a price increase.

What we really want is:

• New products
• New promotions
• New packaging
• New services
• New advertising
• New news of any sort

Almost anything new beats the pants off asking for a new, higher price

But when business is off and capacity underutilized, commodity costs always seem to pick that moment to rise as well. The CFO was right, it was time to raise prices and execution was absolutely critical.

That means the first one that need to be convinced is the sales and marketing team. Without their full support, the customers won’t be swayed and the situation will get worse, not better.

What do you need to support a price increase?

Ideally, you have these tools to support your price increase message:

• A letter from the CEO (or other senior exec) announcing the increase with:
  • The amount of the increase
  • What products are affected
  • The timing of the increase
• Charts showing rising commodities over time
• Proof that you have done your best offsetting the cost increases internally
• A new printed price list
• Any customer-specific special net pricing
• Any changes to policies
• Other support that helps make your case (maybe a competitor’s price increase letter)

Winning the confidence of the sales team is critical to execution

Having the right tools to inform and educate the customer is critical but do you take the time to inform and educate the sales team?

Taking the time to enroll the sales team is a critical step to successful pricing execution.

Owens Corning undertook one of the best examples of this enrollment back in the 1990’s when their asphalt roofing business desperately needed a price increase. As it turned out, the business needed a price increase that basically worked out to a one cent price increase per pound of shingles. (It should be noted that this was not a common measure of how shingles were priced.)

The leadership team made the price increase goal come alive and seem achievable

What was special about the one cent number is how small it seemed to the sales team.

The Owens Corning team kept up the math game and worked out what the average cost per pound shingles worked out to be. At the time it was roughly the price of a pound of bananas.

An analogy was born. Bananas came in only three colors: green, yellow and brown. Shingles came in over 30 colors yet were the same price.

At a national sales meeting, the banana case was made. After a presentation featuring a roof illustrated with bunches of bananas, the sales team took a morning break to find tables set outside the meeting room filled with bananas (some even were stickered with the OC logo).

Creating a rallying cry helps create engagement

After the sales meeting, the division president reinforced the urgency of his price increase message with a letter to each sales person. Included with his note was a t-shirt with a banana on it (complete with the company logo).

Bananas quickly showed up on presentations, buttons and pins to show solidarity with the critical mission of achieving a one cent per pound price increase.

The roofing product manager demonstrated that adding value changes the underlying pricing assumption. In this case, he showed the price per pound of a banana is far, far less than the price per pound of banana bread or banana cream pie.

Keep the team informed on execution success

The team worked hard to execute the price increase. The one cent per pound was never fully realized although they were able to achieve about half the goal.

The leadership team posted a chart that was used to visibly track progress at the headquarter location and was broadly shared with the remote sales teams. Progress was celebrated even though the full goal was never achieved.

Which goes to show that even in a tough environment, a motivated sales team can rally around the need for a tough-to-deliver price increase. Management can make the goals seem highly achievable and create a rallying point that can help the entire team understand the urgency and critical need for the price increase.

For other Channel Instincts posts on pricing, see What Does “Your Price is Too High” Really Mean? or Are You Pricing for Volume or Profit?

Good Selling!