by Mark Peacock of Kiss The Fish
Like most businesses, you probably think that you have set your prices at the highest level you think your customers will be willing to pay.
In reality, most businesses generally under-price and under-value their products and services. This is mainly down to a fear of upsetting customers, and being worried about your competitor’s reactions.
However, it only takes a small improvement in price to make a significant difference to your bottom line. For example, on a business with £10m revenue and £1.0m net profits, if you raised prices by 1% (with no change in volume), your revenue would increase to £10.1m (a 1% increase).
But as that price increase has no additional cost, you would now get an additional £100K on your bottom line as well, giving you £1.1m net profit. This represents a 10% increase in your net profits.
So a 1% increase in price can typically yield a 10% improvement in your net profits!
This simple fact is one that many business owners overlook and feel to scared to do anything about because they are worried about upsetting their customers.
However, the good news is that there any many different pricing strategies that can be used to increase your prices in ways that your customers will not object to.
We often use a model called “50 pricing strategies – which one is right for your business?”.
Most business owners lack awareness of the different methods you can use to improve your pricing, including for example, understanding how to use psychology in setting your pricing strategy.
There are some very powerful but simple techniques that work just as well in a B2B environment as a B2C environment in pricing, but it just takes a bit of confidence and application to make them work.
If this is something that interests you, or you would like to have an initial chat about your pricing strategy, then get in touch with us.