The single most effective thing you can do to improve your profits is to optimise your prices. Sometimes, even just a 2% – 3% increase in prices can dramatically improve your bottom line profit.
The essentials of maximising your value/price proposition are as follows:
- Focus on adding tangible value for money to your customers rather than just giving better value.
- Make the value of what you do much more obvious.
- Create branded names and unique selling points that differentiate your services from those of your competitors.
- Whenever possible provide certainty of prices, so there are no surprises.
- Show benefits not just features.
- Remove the risks to your customers by providing them with fantastic guarantees.
- Remember that people prefer to buy rather than be sold to.
Here are some ways you can achieve this:
Create a range of 5-Star, 4-Star and 3-Star services. For example, a 5-Star service for a graphic design company could include a complete range of design consultancy services, encompassing customers’ printed and digital literature requirements including websites, unlimited telephone advice etc. Your 4-Star service could encompass some but not all of these. Your 3-Star service would include customers’ basic requirements but with a few low-cost valuable extras included. In this way you will give your customers a choice and they will feel more in control of what they are buying. You’ll find the majority of customers choose the Five-Star and Four-Star options.
Offer fantastic guarantees. In doing so, you minimise the risk of customers doing business with you and increase their confidence. The ideal guarantee assures the results of your products or services and has an element of penalty if the results are not achieved. Of course alongside this you have to deliver good service but you probably do so anyway. A good no risk guarantee could include; guaranteed turnaround times; ensuring your clients’ websites are listed on the first page of Google for certain key search terms; and return of part of their fee if they are not completely satisfied.
The 1% +++ effect. Increase your prices by just 1%. You can start doing this with some of your services and monitor the results. In almost all cases you will find that you will hardly lose any customers and those that you do lose will often be the ones that you don’t want anyway. As I said earlier, sometimes just a 2%-3% increase can dramatically increase your bottom line profit. Continue to increase your prices by 1% consistently and gradually, monitoring any loss of business until you notice your bottom line profit just beginning to reduce. At that point you’ve reached your optimal or “Magic Price.”
By Andrew Rhodes