Case Study: Raising Prices Without Losing Customers and Market Share
Periodically we choose one of our case studies from real-member issues in our CEO peer group meetings. The objective is to share a real-world CEO challenge with practical solutions and experiences so that if you know anyone facing something similar, you can help them with ideas. We will never reveal anything confidential or of sensitive nature.
Industry: Manufacturing / Distribution
Category(s) of the COPI: Challenge, Opportunity, Problem, or Idea: Raising Prices Without Losing Customers and Market Share
THE ISSUE: The manufacturer has its own product line and is a non-exclusive distributor of other similar products. International suppliers have raised their prices between 10-20% effective immediately. They cannot sustain the price increase and are concerned that if they do, it will negatively impact their sales, client relationships, and what to do with pending orders that are impacted by the price increase.
The Insights:
Offer a volume discount that offsets the price increase.
Create discount levels that involve multiple incentives for lower pricing but also incorporates loyalty.
For orders already placed, give incentive for no increase if another order is placed by a certain time limit; give them credit at that time.
Incorporate price increases at different amounts on products with different margins.
Offer to pay early discounts to help offset the increase.
Speak in a positive tone, donโt defend the message about the price increase. Include why it happened and what you as a company are doing to mitigate any further increases.
Consider something of value to give to the client that does not cost or is of minimal cost to offset the perception of the increase. Example: free delivery for orders over โx.โ Priority expediting for a discount.
The Outcome:
Their notification to clients was received positively because they gave them choices on managing the increase in prices or how to mitigate it. They shared what they were doing to manage any future increases and communicate and work with suppliers to do so.
๏ปฟA volume discount level was implemented with a success that resulted in increased market share.
No clients were lost, sales increased due to the volume discount, and margins held.
