What Should A Negotiator Do When The Price Goes Up?

When a price goes up, what's the impact on your negotiations?
When a price goes up, what’s the impact on your negotiations?

Image Credit:
Degan Walters

The one thing that just about any negotiator does not want to have to deal with during a negotiation is a price increase. Look, it’s hard enough to hold our position with the price that our product or service has right now, let alone having to deal with a 5%, 10%, or even higher price increase. Although we may not want to do this, there are times when it is thrust upon us and we really have no choice. The other side of the table is going to become angry, they are going to get annoyed with us, and we’re just going to have to find a way to deal with all of that.

It’s All About Information

When you tell the other side of the table that the price of something has gone up, you know exactly what their first question to you is going to be: “Why?” What this means for you is that you are going to have to have a good answer ready and waiting for them. What this means for you as a negotiator is that you’ve got some homework to do.

What you need to understand is that the more that you can find out about why your company is raising their prices, the better your understanding of what is going on will be. This is knowledge that you can then use to answer the other side of the table’s “Why” question. Every company is different, and so how you are going to get the information that you need is something that you are going to have to research. Generally, any price increase has to be explained to the sales teams and so these are meetings that you should plan on sitting in on and asking a lot of questions at.

Advance Notice Can Save The Day

One of the reasons that the other side of the table is going to be so irritated with you is because any sort of price increase on your part is going to cause a disruption to their plans. They have probably already created budgets, manufacturing and marketing plans, etc. Your change in price threatens to disrupt all of the work that they have already done.

Your responsibility as a negotiator is to make sure that the other side knows about any increase in prices as soon as possible. Hopefully well in advance of the price increases taking effect. The more time that the other side knows that the price increase will be coming, the more time they will have to accept it.

Invoke The Power Of Legitimacy

Acceptance of a price increase may be hard for the other side to handle. You are basically giving them bad news that they really don’t want to hear. If you are not careful, when you present them with notification of the price increase, they may not believe you and they may end up pushing back.

What you are going to want to do is to prove to them that the price increase is legitimate when you tell them about it. You need to let them know that the price increase is here to stay. To communicate this, you are going to need to make sure that you bring every piece of paper that your company has released about the price increase (press releases, memos, updated price lists, etc.) to the negotiations. Showing this material to the other side will cause them to believe that the price increase is real.

What All Of This Means For You

Every negotiation is difficult. A negotiation in which you have to tell the other side that your firm is raising their prices is even more difficult. This news is not going to make the other side happy and that is going to make it even more difficult for you to reach a successful deal with them. You are going to have to take control of the situation and convince the other side that this is their new reality.

In order to clearly communicate what your company is up to, you are first going to have to provide the other side with information about the price increase. This means that you have some homework to do as you gather information about the price increase from within your company. Any advance notice of the price increase that you can provide the other side with will improve things. An advance notice of what your company is planning on doing will provide them with more time to accept what will be happening. You need to make sure that the other side understands that you are not making this price increase up. Provide them with written proof that your company is really raising their prices.

The last thing that any negotiator needs is yet another roadblock in their efforts to reach a deal with the other side of the table. When your company decides to raise the price of something that you are negotiating, your life just got a whole lot more complicated. It is your responsibility to let the other side know that the price increase is coming, why it’s happening, and then to show that it really is real. Do a good job of this and you’ll be able to move beyond this issue and still reach a deal with the other side of the table.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Do you think that it would be a good idea to bring someone else in to help explain why your company is raising it’s prices?

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What We’ll Be Talking About Next Time

I often like to think about a negotiation as being very similar to being the pilot of an airplane. In order to keep the airplane flying, or for that matter to have any hope of landing it, you’ve got a lot of work to do. You have to make sure that the plane is going fast enough to stay up, you have to adjust the wings to go up or down, and you have to fiddle with the tail if you want the plane to turn. All of these things have to be done at the same time. If anything changes, then you are going to have to make a number of adjustments to keep the plane on course. It turns out that the same things happen in a negotiation.