Understandably it's not unusual for a business owner to ask me how to make more…
I am and always have been allergic to discounting. Clear more stock – yes, keep your team working during a quiet patch – yes, temporary cash flow – yes, but to make you more profit – NOOO! Sure, if you’ve picked up some discounted stock and are still flicking it off at full margin under the pretence of a sale that’s great but what we’re talking about here is discounting and decimating your profit margin. You see it all the time, owners who believe that dropping their prices will draw in the crowds and make them more money. Really?
I’d suggest dropping your prices is one of the fastest ways to put yourself out of business……I would also suggest putting UP your prices is one of the fastest ways of increasing your profits.
Remember there is only one person who is fixated by your pricing and that’s YOU, and unfortunately your opinion is worthless because you don’t matter. The first business I owned was in tourism/transport. I’d bought it from an older couple who were of a different generation. They had no pricing structure in place, instead it was all based on what THEY thought it was reasonable to charge (yes really – and not as uncommon as you’d think). One of the first things I did was put up the prices….and I mean really put them up, for some services the increase was over 30%. This caused a huge upset with the previous owners who suggested it would destroy the business and all their hard work. It didn’t. I understood that people buying our services were (generally) on holiday, had cash in their pockets and wanted a great experience. The cost was not a priority.
Of course people do ask for the price but that doesn’t necessarily mean they’re a price shopper, as I’ve mentioned in other posts its value we’re really seeking and price is only one element of the decision making.
I also owned retail stores for many years and in around 2010 for reasons I won’t go into now we raised our prices by 5% pretty much across the board. Did we notice a drop in sales? Nope. And the beauty with this of course is that all that additional revenue goes straight into your back pocket.
If you absolutely have to offer a special deal, don’t discount the price, throw in an add-on. Look at it this way, if you give someone a 10% discount on a £200 item, that’s £20 cash you’ve lost. But what if you gave them a product or service valued at £20 instead, what would your cost in cash terms be then? Yep, less than £20. Give away value if you have to but NOT cash.
Pricing is an interesting topic and we’ve hardly scratched the surface here but I’ll bet you could raise your prices tomorrow and 80%+ of your customers wouldn’t even notice. Even if some did you can afford to lose those pesky price conscious ‘D’ grade clients because the increased profitability you’ve generated will cover it.