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Suppliers to the automotive industry do not accept price increases unless they have zero alternatives. How do we handle this?

by Dave Kahle

I'm sure you are not the only person thinking this way, nor is the automotive industry the only industry that holds this position. We commonly hear from our customers that our prices are too high, and that they won't accept price increases.

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Now, I'm assuming that the reason you want to increase their price is because your cost has increased. In order to maintain your margins, you have to increase the sales price to proportionately reflect the increase in your cost.

But, your customer is vocally objecting. What do you do?

First, analyze the business. If you absorb the price increase and thus decrease your margins, can you live with that? Is the business still profitable? Is the account worth the low margins? If the answer is " Yes" you can live with it, then absorb the increase, tighten your belt and try to leverage that position into more opportunities within the account.

If the answer is " No" it is not worth maintaining the business at low or no margin, then you need to be brutally frank with the customer. Tell him you cannot continue to service him at this price. That you'll maintain the price for 30 days, and that on day 31 the price will be increased. If he would like to purchase the product from someone else, you'd appreciate him letting you know that.

Then stick to your position. There are worse things then losing a piece of low margin business. If he goes elsewhere, let him. There is a great deal of power that comes to you when you show you have the ability to walk away from an unprofitable piece of business. In the long run, you, and your prices, will have more credibility.

The worse thing to do is to cave into his demands for lower prices -- to communicate a price and then retreat from it. This trains the customer that your pricing has no power or validity, and encourages him to push for lower prices every time.

Dave Kahle has trained tens of thousands of B2B salespeople, sales managers and business owners to be more effective in the 21st Century economy. He's authored nine books, and presented in 47 states and seven countries. To access Dave's training, insights and tools online, visit The Sales Resource Center. Visit www.davekahle.com to check out a seminar near you.

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