Article Is It Hard To Ask For A Raise?  Yes.  Should You?  YES!!

Let’s say it right from the start—yes, it’s hard to ask for a raise, no matter what some books and articles say.  In vending, a raise means increasing your prices.  Whether the price increase is due to rising wholesale prices, or to meet operating expenses, it is a necessary part of being in any business.  Here are some pointers on how to act effectively when you need to raise your prices:

1.) When you are introducing new products, you have a perfect way to increase your general price levels.  For example, you’ve exchanged your regular potato chips, selling for 50¢, for a new brand or flavor selling at 55¢ (price increases are often in nickel increments).  If the new chips are a hit, great!  After several weeks, if your customers prefer that you go back to providing the original chips, you could probably keep the price at 55¢ without any resistance (by the way, these prices are just for an example and may not reflect your actual prices).

2.) Don’t raise your prices every time there’s a wholesale price increase.  For instance, don’t add a nickel to candy in April, add a nickel to juice in June, and add a nickel to chips in August.  It makes you look chintzy, and your customers can get frustrated with the constant increases.  It’s better to hold at your current prices as long as you comfortably can, and then increase across the board.

Let your locations know that you protected them from price increases as long as possible, but now you’re forced to make the increase to meet rising operating costs.  Everyone is used to “cost of living” increases, and business owners and management understand wholesale costs and price increases as a natural part of the business world, and they’ll understand and appreciate your professionalism.

3.) If you’re expecting to make a general price increase on the majority of your products, it’s probably most effective to send a letter to the location’s management or your contact for that location, stating the reason for the increase, the amount, and the date the increase will take effect.  Some distributors feel comfortable sharing a Profit & Loss statement for a particular location, so the management really understands the need for the price increase, because it’s in a “language” they can understand.  By the way, you may wish to call your price increase an “adjustment”, since it is adjusting the profit and loss ratio of your business. This is a common term in the business world.

Your letter will be professional, and in your last paragraph, be sure to thank your customer for their understanding.  Provide your phone number if they should have any questions about the increase; it’s usually less likely that you’ll receive a response to your letter, compared to a face-to-face meeting.

4.) Whenever possible, use world events to provide you with price increase opportunities.  For example, the news might have carried a story about a disastrous coffee crop in Brazil, with predictions that wholesale prices will be increased (this actually happened a few years ago).  This sort of report often happens with different types of crops; for example, what if you heard there would be a shortage of Hawaiian pineapple?

This is a perfect opportunity to send the “As you probably know...” letter.  Start your letter by saying, “As you probably have heard on the news recently, the Hawaiian pineapple crop has been affected by unseasonably cold weather.  Due to this recent occurrence, we are forced to increase the prices on our pineapple juice products.”  Be sure to include the amount of the increase and the effective date, and you might want to clip the news articles to back up your letter.  Don’t forget to thank your customer for their understanding. 

5.)  Do not just go in, change your prices, and walk out.  This may be perceived as arrogance. If you think your customers “won’t notice the price increase”, you’re fooling yourself.  If you worked at the office and used that machine every day, you’d  notice the price increase, wouldn’t you? 

Put up a sign to let employees know about the price increase, and why; don’t take it for granted that their management told them.  You might want to post a copy of the news articles mentioned in the previous tip, as well.  Here’s a marketing tip used by Big Business:  If you have separate snack and beverage machines, put the sign on the machine that doesn’t have the price increase; if you have a single machine, place the sign slightly away from the machine.  If the sign isn’t right in your customer’s face when they go to make a purchase, it can distract attention away from the price increase.

6.)  Always be aware of the prices at local grocery and convenience stores.  For example, you should be able to state the price for a bag of Famous Amos cookies, a bag of Doritos, a can of Diet Coke, and a Snickers bar at the supermarket, 7-11, gas stations, and other vending machines in your community. If you can’t, you haven’t done your homework, and you could be cheating yourself!

Obviously, you don’t have to stick to the items listed above; they’re just typical popular items—but you should know the top selling items and their prices around your area, as well as knowing what the “refreshment options” are at each of your locations. Then you can point out how competitive your prices are.  You’ll know that your prices are fair yet still keep a comfortable profit margin for you.

For instance, if the nearest convenience store sells a product for 80¢, and you sell it for 65¢, a nickel price increase won’t seem so extreme. Knowing the prices at your customers’ “refreshment options” makes your refreshment service more competitive—and more attractive if it’s priced lower than the others.

7.)  You might risk angering an account with a price increase, so if management wants only one or two items to be increased, it may well be worth the compromise.  Flexibility is important. Your performance record is the most important element in any price negotiation.  Have you consistently provided excellent service and developed a good relationship with your customers?  Have you been responsive to their requests?  Have you provided fresh products?  Have you kept your equipment clean?  Have you always been pleasant and professional?  If the answers are ‘Yes’, your customers should not have a reason to refuse your price increase—because they want to keep your good service!

Finally, don’t forget that a great way to get a raise is to give one to yourself—add more machines!  Some distributors use price increases not just to cover operating costs, but to fund expansion.  Sometimes people focus on the costs of expansion, without thinking about the benefits.  Every new machine adds to your bottom line and increases your business—and that’s the way to grow!