How to Soften Price Increases by Creating a Fallback Option

When faced with a price increase, clients may feel backed into a corner with only two options. One option is to take the price increase, sacrificing somewhere else in their budget. The other option is to stop buying from you and either forego the service or go through the hassle of finding another vendor.

Price increases typically create a “yes” or “no” scenario. Instead, what if you offered a third fallback option that was a scaled-back version of your service?

Your fallback option could be a lower-cost package with fewer benefits for your clients that are not willing to accept the price increase. You win because you keep the client. The client wins because they get to save money while keeping pieces of your offering.

The good news is that your fallback option not only can preserve revenue, it may also be able to preserve your profits. Done correctly, it may also create a strategy to go after your competition and get marketshare.

Here are a few things to consider as you create your fallback option.

Ask What Is Essential To Your Customers

When I was a kid most of the cars we had growing up had an AM radio, bench seats, and windows that you rolled down by hand. Now my car has an incredible surround-sound stereo system, multi-position heated buckets seats, and automatic windows. As much as I like these amenities, the reality is that I mainly need my car to get me to the airport and back. If cost-cutting were necessary, I could live without the fancy things.

Think about your products and services through the eyes of your customers—especially the ones who tend to be price-sensitive. What is most important to them? What can they not live without? What challenges are they facing that your offering alleviates?

Bob Moesta and Clay Christensen believe that buyers don’t buy products and services. Instead, they hire them for a “job to be done.” In the case of my car, I mainly hired it to get from point A to point B. Sure, I also hired it to provide some comfort, enjoyment, and status. But if times are tight what I mainly need is transportation.

Think about your offerings. What “job to be done” did your customers have that motivated them to purchase from you? What is essential and what is optional?

Your fallback option should include the essentials. In fact, you might even call it your “essentials” package. Strip away the surround sound, heated seats, and automatic windows. Offer a lower-cost option that still gets the job done. This allows you to keep your client while becoming a partner that also helps them achieve the goal of reducing their costs instead of raising them.

Consider You How You Can Preserve Your Profits

Just because you offer a fallback option with a lower cost does not necessarily mean that you need to lower your profits. Look for ways to package your “essentials” option in a way that has the same profit as your full offering.

Once you create your “essentials” bundle look at the cost of the product and/or service.

Then, take the actual dollar amount of the margin you had on your full offering and add it to the essentials offering. If you use this as the price you can protect your profit.

Can you always protect your profits? No. However, sometimes you might find a way to even raise your profits.

Create a Campaign To Add Back Margins

For the customers that choose your fallback option instead of a price increase, build a marketing campaign that allows them to add back some of the options. You might let some time pass. Then start dripping out marketing that lets them add-in features. Make it easy to bring these back in.

For example, my TV provider recently raised their rates. If they had a fallback option, I might have opted for fewer channels to save some money. Over time, the provider would be smart to begin offering some of the channels I lost for an incremental increase in monthly fees.

You might be able to do the same. After some time has passed, launch a marketing campaign that invites clients to incrementally upgrade their experience with your company.

Go After Your Competition

As you create your fallback option you may discover a new offering that could attract customers from your competitors. Chances are your competitors are raising prices. Your “essentials” offering could be the thing that lures them away. Once you bring them on board you can expand the relationship.

Originally Published on Convergo.

About the Author

Darrell Amy: Start Your Revenue Engine

Darrell Amy

Darrell is passionate about helping generous leaders and their organizations grow revenue and impact. He’s the author of Revenue Growth Engine and the soon-to-be-released book, Exponential Growth. Darrell motivates audiences as a professional speaker, sparks ideas in growth mastermind sessions, and serves on the board of several innovative companies.

More Growth Resources

A Better Alternative To the Buyer’s Journey?

A Better Alternative To the Buyer’s Journey?

What if the way we think about Buyer’s Journey is upside down? Smart marketing and sales teams collaborate to map out the buyer’s journey, thinking about how they can provide the right information to buyers at the right time during their decision making process. While...

The Number One Way Marketing Can Help Sales Win

The Number One Way Marketing Can Help Sales Win

Let me cut to the chase: the number one way marketing can help sales win is by interviewing clients and creating insightful case studies. In Elite Sales Strategies, Anthony Iannarino coaches reps on how to achieve the one-up position by bringing insights into the...

How To Make Revenue Growth Predictable In Uncertain Times (Part 2)

How To Make Revenue Growth Predictable In Uncertain Times (Part 2)

Over the past few years, business leaders have become familiar with uncertainty. In the midst of pandemic pivots, supply-chain shifts, and hiring hassles, one thing has remained constant: the need for revenue. Revenue is the lifeblood of business. We have proven our...

A Better Alternative To the Buyer’s Journey?

What if the way we think about Buyer’s Journey is upside down? Smart marketing and sales teams collaborate to map out the buyer’s journey, thinking about how they can provide the right information to buyers at the right time during their decision making process. While...

The Number One Way Marketing Can Help Sales Win

Let me cut to the chase: the number one way marketing can help sales win is by interviewing clients and creating insightful case studies. In Elite Sales Strategies, Anthony Iannarino coaches reps on how to achieve the one-up position by bringing insights into the...

How To Make Revenue Growth Predictable In Uncertain Times (Part 2)

Over the past few years, business leaders have become familiar with uncertainty. In the midst of pandemic pivots, supply-chain shifts, and hiring hassles, one thing has remained constant: the need for revenue. Revenue is the lifeblood of business. We have proven our...

How To Make Revenue Growth Predictable In Uncertain Times (Part 1)

Creating steady revenue growth can feel impossible during uncertain times. The headwinds of hiring challenges, price increases, and supply chain issues seem to threaten growth goals. While you can’t change the circumstances, you can be proactive in setting your...

How to Create Lead Magnets that Drive Revenue Growth

Every growing business needs a stream of leads from ideal prospects. One way to create leads is with lead magnets. A lead magnet is information of value to a prospect that captures their attention and motivates them to exchange contact information. In Revenue Growth...

Digital vs. Traditional Lead Channels—Which Should We Use?

Leads are the lifeblood of revenue growth. One of the most frequent questions we get asked is, “What is the best source of leads?” This is often followed up with questions about whether “new” digital lead channels are better or whether it is better to be more...

How Your Mindset Affects Revenue Growth

In The Upside of Stress, Dr. Kelly McGonigal showcases research on the power of mindset to affect outcomes. Those with a negative mindset toward stress experience much different results than those with a positive mindset toward stress. It turns out that mindset...

From 2020 to 2022: Reflections on Connection and Client Loyalty

We learned a key lesson about empathy and connection at the beginning of the pandemic. This lesson has been easy to forget in the pressures of 2022. However, this lesson may be the key to success in this environment. It’s hard to believe two years have passed since...

Five Ways To Accelerate Towards Fear

Most people do one of two things with fear. Some freeze. Others run. Few push through and find their dreams. There are two types of fear. The first type should stop you in your tracks. Adrenaline surges as you round the corner on a trail to hear the roar of an angry...

How to Soften Price Increases by Creating a Fallback Option

When faced with a price increase, clients may feel backed into a corner with only two options. One option is to take the price increase, sacrificing somewhere else in their budget. The other option is to stop buying from you and either forego the service or go through...