Implementing a cost price increase (CPI) can be one of the most challenging tasks for a supplier’s negotiation team. It requires balancing the need to maintain profitability with the risk of disrupting valuable customer relationships. When competition is fierce and customer expectations are high, suppliers need a thoughtful and strategic approach to successfully navigate this delicate negotiation.
Understanding the negotiation challenge

CPIs are often driven by external factors beyond a supplier’s control, such as rising raw material costs, supply chain disruptions and inflationary pressures. While the business necessity is clear, conveying the reasoning behind these increases to customers can be fraught with tension. Key issues include:
Customer pushback: Buyers may resist increases, fearing a negative impact on their margins.
Relationship risks: Poorly handled negotiations can erode trust, resulting in damaged relationships or even lost contracts.
Market positioning: Competitors may seize the opportunity to move in, putting additional pressure on negotiators.
Assessing the balance of power
Suppliers are dependent on their customers and will often credit them with more power than they deserve. Even large global suppliers, the owners of market leading products and services, will often find it difficult to initiate CPIs. The threat of losing business to their competitors can create fear whatever the business size. And even if they feel secure in their core business, they can feel vulnerable elsewhere.
If large organisations can feel the fear, then smaller businesses who may believe that they have little product differentiation can often approach CPIs with nothing other than dread!
Dealing with the fear of ‘no’

Against this backdrop, many suppliers will be apprehensive about what they often see as the inevitable rejection, or certainly negative reaction, to the CPI demand. Depending on the importance of the customer to the supplier, they will need to determine what consequences (if any) will result from a refusal to accept (or even discuss) their CPI demand.
As with all challenging negotiations, understanding the true (rather than perceived) power the supplier has, and therefore the options available, is critical to the negotiator’s planned approach. Without analysis and understanding of these options, a supplier can easily compromise its CPI initiative and fall short of its objectives.
Navigating the cost price increase challenges
In initiating a CPI, the supplier’s negotiation team should ensure successful navigation of the following:
Determine if this is a standalone initiative, part of a wider negotiation, or if the opportunity exists to trade value in return for the CPI
Develop their confidence in the power they have, even with their largest customers
Develop an effective negotiation strategy and process to meet their objectives
Recognise they may need to segment their customer base and develop several different approaches
Recognise the consequences - either real or perceived - from a rejection of the CPIs
Create and maintain internal alignment and support for the negotiation plan
Ensure the negotiators have the confidence and capability to implement the negotiation plan
Maintain the customer relationship both during and after the negotiation process
A collaborative approach to negotiating a cost price increase
While cost price increases are rarely easy, a collaborative approach can be helpful. By prioritising transparency, focusing on value, and equipping your team with the right skills and tools, strong customer relationships can be maintained, even in the face of rising costs.
We specialise in training negotiation teams to navigate the most difficult conversations. Our ‘Mastering Cost Price Increases’ workshop provides practical tools and strategies to help negotiators navigate these challenges confidently and collaboratively.
Interested in learning more? Contact hello@newbeginningsconsultation.com to explore how we can support your negotiation teams to successfully navigate cost price increases with your customers.