How to tell your customer about a price increase
As the Western Territory Manager for Sunbelt Industrial Trucks in Dallas, Texas, I’ve dealt with a variety of customer service situations. Telling a valued customer that prices have increased is probably the most difficult. First and foremost, you have to treat the customer, who is purchasing something of significant value, the same way you would like to be treated in that situation—with honesty and respect. If you can convey those qualities to your customer, they will probably take the news about higher prices better than they would otherwise.
As a salesperson, be prepared to face the obvious objections a customer will have to a price increase. Most important, know why there is an increase in product prices. The easiest and most honest explanation is that everything associated with fuel and steel is going up in price. As soon as I tell that to customers—whether they own a machine shop, distribution facility or manufacturing center—nine out of ten people understand.
Fuel and steel are more expensive, and those are the two predominant things on a forklift. I then explain to my customer that now is the time to buy because things will not get cheaper. With fuel, steel and interest rates going up, products are going to become more and more expensive. Applying an interest rate hike, even by as little as a quarter percent, across multiple units results in a price increase of a huge dollar amount.
Remind your customers that prices may have increased, but their current purchasing power has never been stronger. Though interest rates are constantly fluctuating, there is no downturn in steel and fuel prices.
The economy is charging ahead, manufacturing costs are up, and the final product is more expensive. If my customers wait even a few more months, they will pay more for a forklift.
I have to explain the current economic situation to customers about 50 percent of the time.
Most clients, though, understand what is going on, though they may initially complain about something being more expensive than it was last year. If price is the only objection, it can generally be overcome. Purchasers who keep objecting to the expense are probably not happy with the entire package. I need to sell these customers on every aspect of a forklift (an extremely competitive item) so I tell them to look across the board at slightly varying prices in the area so they know everyone is in the same ballpark. Once they realize that, I can usually sell my forklift despite the increased price.
I never prepare a written statement to memorize or give to customers when prices are up. I was taught 15 years ago, when I was 23 and just starting in this business, to sell myself first. The forklift is the absolute last thing a customer gets from me. By the time we’re talking price, I want him committed to buying from Matt. Not buying from Sunbelt, not buying a Komatsu, but buying from Matt. If he believes that I’m the best person to buy a forklift from, the few more dollars he might spend with me are not an issue.
It is important to give customers that amount of personalized attention because fuel and steel prices are rising unabated. Everyone discounted their forklifts in 2001 through 2003. We started seeing price increases in 2003 because the economy rebounded—due in part to steel and factories producing their margins again. In the meantime, the new EPA guidelines required different, government-approved forklifts that cost more to build. In the past three years, this industry has seen a price increase every six months.
2006 will probably mark the highest prices on forklifts that we have ever seen, due to inflation and a roaring economy. So when I get that customer who inevitably complains about the price, I give this analogy: You could have bought a forklift in 2000 or 2005 and you would have spent the exact same amount of money. In 2001 and 2002, the economy was sluggish, steel and fuel were not up, and there was de-inflation in the forklift market because we had to sell them. That bottom dropped out with an improved economic situation in 2003 and 2004, and prices increased again.
Manufacturers and dealerships wanted their margins back, steel and fuel went up, and by the time we hit 2005, we were at the exact same level, dollar for dollar, as we were in the year 2000.
I’m fortunate because my company looked to the future and ordered hundreds of forklifts at old pricing. The factory’s happy because they have orders sitting there; my customers are happy because I’m fully stocked; and I have the best pricing that Komatsu will allow, which keeps my pipeline full. I know others may not be in the same situation, so use the aforementioned explanations and a charismatic personality to successfully sell forklifts, despite increased prices.
|Meet the Author
Matt Maddock is western territory manager for Sunbelt Industrial Trucks in Dallas, Texas.