The fourth quarter is the peak of domestic trade orders and a period of high incidence of raw material price increases. The dilemma of many factory owners is:I dare not speak up when the cost rises, for fear that customers will run away; if I insist on not adjusting the price, I will lose more and more.When it comes to price adjustment, doing a good job is an opportunity to screen high-quality customers, while doing a poor job is the reason for losing customers. The difference lies in the method. This article explains the timing, steps, writing of price increase letter and contract terms in one go.
1. Think clearly first: the price adjustment is the rules, not the price this time
What customers dislike is not just the price increase itself, but the uncertainty that "it may rise again at any time and there are no rules." Therefore, there are two goals for price adjustment communication: to adjust the price this time, and to set the rules of "how to adjust it in the future." The second goal is more important than the first-with the rules in place, the next price adjustment is to implement the terms, not to renegotiate.
At the same time, there must be psychological expectations: if the price adjustment notice is issued, a group of customers will inevitably be lost. But the general ledger must be calculated-every additional month of hard-carrying loss-making orders is eating up the factory's cash and production capacity; most of those screened out are price-sensitive customers, and only those left behind will have long-term value.
2. Three steps: accounting classification, advance notice, and locking window
- Step 1: Calculate and classify, don't do it across the board.Customers are divided into three categories according to gross profit margin: if the gross profit has been increased by more than half, they must be adjusted; if the gross profit has been eroded by 20% to 30%, they must be adjusted slightly or the framework must be discussed first; if the gross profit has a safety cushion, they must stay put and keep it for reputation. At the same time, attributing the price increase to specific raw materials can clarify the price adjustment of "which cost has increased by how much", and customer acceptance is much higher.
- Step 2: Give 30 to 45 days 'advance notice.Leaving customers a time window for replenishment and price comparison is not a courtesy, but a buffer for yourself-the goods that customers hoard in advance are your transitional sales. Sudden price increases and immediate effect are the easiest combination to push customers directly to competing products.
- Step 3: Give lock window and ladder options.Options are attached to the notice: If you place an order now, you can make up for a round of goods at the original price within 30 days; if you sign the annual framework and determine the quantity within this quarter, the price will be locked to the first quarter of next year. Give customers a step up, and also give yourself a lock in production capacity in the fourth quarter-production capacity in the peak season is itself a bargaining chip.
3. How to write a price increase letter: five elements
The price increase letter should be short and completed in one page. Five elements are indispensable:
- Facts:Which raw material, when it started, and how much it increased (as evidenced by public market prices, such as spot quotes for bulk commodities), put the facts first and then discuss the price;
- Range:The extent of product price increase and the specific implementation price list should not be written with the vague words of "prices will be negotiated separately";
- Effective date:Make it clear that "starting from September X, the new price will be implemented, and orders have been confirmed to be delivered at the original price", so that the boundaries will be clear;
- Transition arrangements:Locking windows, replenishment rules, exclusive options for annual customers;
- Sincerity:Explain how much increase the factory has absorbed through process optimization and centralized procurement allocation, and the price adjustment is the remaining part after digestion-this sentence determines the temperature of the letter.
4. Embed three clauses in the contract first, and there is no need to discuss it next time
- Price linkage terms:It is agreed that when the price of major raw materials fluctuates beyond a certain range (such as 5% above and below), the product price will be adjusted in a linkage manner according to the formula, and a reference market release channel will be attached. With this clause, price increases are an implementation formula, not a default.
- Lock-in-quantity and price terms:Customers commit quarterly/annual purchases in exchange for a price lock window. You get stable production scheduling, he gets price certainty, and both parties get what they need.
- Offer validity terms:All quotations are marked with a validity period (usually 15 to 30 days) and the contract states that "the latest confirmed quotation shall prevail." The validity period is the basic action to keep the initiative in price adjustment in your hands.
5. How to deal with three difficult situations
Scenario 1: Customers use competitive products at low prices to lower prices.Compare the total price, compare the cost structure: Please ask the other party to break down the quotation of competing products to see the materials, specifications, billing period and after-sales terms. Colleagues may use prices obtained from thinner materials and longer accounting periods. If the comparison dimensions are drawn up, many "low prices" will no longer stand. If you can't get it all together, it means that you are not your customer.
Scenario 2: The customer requires retroactive price increases for orders placed or requests unlimited repayments based on the original price.It is the bottom line and credibility that confirmed orders are delivered at the original price, and we must not retroactively increase prices; but the "unlimited replenishment of orders at the original price" must be blocked back-replenishment is based on the lock window rule, and over-window means the new price. The tone is firm and the caliber remains unchanged.
Scenario 3: The customer receives the price increase letter silently and does not respond.Take the initiative to follow up on the call within three days, don't wait. Most of the silent customers are comparing prices, and active communication can also strive to negotiate the locked window before the competitive products are quoted; when he comes back with a lower price, the situation will be reversed.
common problems
1. 1. How to determine the price increase rate is reasonable?
First calculate the actual increase in costs caused by this increase in raw materials, and then determine the sharing ratio based on your own gross profit structure: you absorb part of it (process, centralized procurement, loss optimization), and the customer bears the rest. The range must be supported by cost data, so that customers can pay for it when questioning.
2. 2. Should the price adjustment strategies for large and small customers be the same?
Different. Major customers conduct formal communication: make interviews in advance, provide annual frameworks and price lock-in options, with the focus on ensuring the relationship and quantity; small customers can use a unified letter plus effective date rules, with the focus on saving communication costs and implementing the same rules. Strategies can be different, and the price system cannot make exceptions in private, otherwise the rules will be abolished.
3. 3. What should I do after the price adjustment notice is sent out?
Don't lower the price and retain it first, ask the other party's comparison dimension: whether it is the pure price or the total cost including billing period, delivery period, and quality. Give the other party a chance to re-check the price, and at the same time provide a locking window as a buffer. Customers who really want to leave cannot and need not be retained-invest the saved production capacity and account period resources in the customers who stay.
--Qihang AI Foreign Trade Research Institute·Let China Intelligent Manufacturing Set sail to the sea| Foreign trade customer consultation: 180-0327-6609
