As a contracted supplier, one of the hardest subjects to broach is raising prices. There is no silver bullet to getting a price increase through to an IDN, but here are a few ideas to help it go as smoothly as possible.
As one famous GPO CEO quips when approached on the subject, “I play Nancy Reagan, and ‘Just Say No!’” In this market, it’s not uncommon to face the challenge of needing to increase your prices to stay competitive or maintain profitability.
However, communicating a price increase to IDNs can be a delicate process that requires careful planning and execution.
Here are five keys to raising prices to on an IDN.
No. 1: Be transparent about the reasons behind the increase
The first key to successfully communicating a price increase is to be transparent with IDNs about why the increase is necessary. Explain any external factors that are driving the need for the increase, such as changes in the cost of raw materials, shipping costs, or inflation. If you are citing increases to items such as materials or labor provide some third-party statistics if possible, to substantiate your claim. Letting your customers know the reasons behind the increase can help them understand and accept the change more easily. Keep in mind they may not like the message but will appreciate the candor.
No. 2: Give customers advanced notice
It's important to give customers advanced notice of any price increases to allow them time to adjust their budgets accordingly. Consider providing notice as much in advance and communicate the change as thoroughly as possible. In-person is really important as well followed up by written details. Like in all great challenges, when in doubt, communicate, communicate, and communicate again.
No. 3: Show the added value
When communicating a price increase, it’s important to show customers the added value they will receive for the higher price. This could include improvements in product quality, expanded service offerings, or more personalized attention. It also may be as simple (yet incredibly important) as supply assurance. They may not like the news, but it's your job to help them understand the importance of the increase.
No. 4: Offer flexibility whenever possible
Not all IDNs will be able to absorb a price increase, so it’s important to offer some degree of flexibility. Consider offering discounts or other incentives for customers who sign longer-term contracts or who purchase larger quantities. Alternatively, you could consider offering a phased-in approach to the price increase, allowing customers to adjust gradually over time, if at all possible.
No. 5: Listen to customer feedback
Finally, be open to feedback from your customers and address any concerns they may have about the price increase. Take the time to listen to their feedback and find a solution that works for both parties. This could involve adjusting the timing or the size of the increase or offering additional value-added services to offset the cost. They may not appreciate the increase, but feeling heard by you will go a long way.
Communicating information to an IDN that they do not want to hear is never easy and unfortunately they're hearing it far too often these days. They may even be mad at what they hear, so make sure you don't do it in a way that also makes them mad at how they hear it!
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