It may seem a little contra-logical to talk about increasing your prices at a time when you are suffering financial stress.
Maybe you are thinking “surely, that means that I will sell less!”.
But that is not necessarily so:
- Product range or services in competition with other suppliers in your area:
Price low/competitively to keep your customers.
The 80/20 Rule suggests that up to 80% of your products/services may need to be priced in this competitive manner.
Go to the Skills Module introduction: SM2.0 80/20 Sales Growth; Double Sales, Triple Profits
- The same Rule suggests that around 20% of your products/services may have some element of exclusivity, uniqueness or premium value. The price for these could be increased.
Independent research has suggested that a price increase of as little as 1% can lead to an 11% increase in Profit
Go to the Skills Module introduction: SM1.0 How 1% Price Change Could Give 11% Profit Increase because:
- Extra income from the increase in price is 100% profit. There is no increase in either the Cost of Goods Sold or the Fixed Costs associated with that product at the higher price.
The more products that you can increase the price on, the more Profit you will get from the sales of those products.
If you are uncomfortable increasing the price, or are uncertain how much the market will “bear”:
- Experiment with a slow increase, for one calendar month, and see whether you meet any price resistance.
- If none, increase it by a small amount again. And so on until you sense that there is some price resistance.
Keep in mind that you may lose some customers from any increased prices. If they are only very small customers:
- The associated increase in Profit more than offsets the loss of a small volume of sales.
- Especially if you are dealing with price sensitive customers.
- They will always look for the “best” deal rather than appreciate any premium services that you have to offer
For more help understanding any issues relating to this Section of the Turnaround90 Campaign, use the 12Faces Diagnostic System to drill down to root causes of problems and find our suggested Treatments.