Wednesday, June 30, 2010

Your Prices Are Too Low!

Would you rather earn $100 each on ten customers or $10 each on one hundred?

If you answered ten customers, you’re an efficient businessperson.  Why expend extra effort dealing with ninety more people for no extra income?  You are in business to make a profit, right?

In the same way, you might be leaving money on the table, charging less to sell more volume but earning a lower net profit if your prices aren't high enough.  Ultimately, you want to charge as high a price as your most price-sensitive customers will pay.  So if everyone can easily afford to buy your product, your prices are too low.  Your most price-sensitive customers should feel the pinch.  If you never encounter any price resistance, you’re leaving money on the table.

If it’s your job to set prices, I understand you don’t want to deal with customers endlessly grumbling over increases.  But there’s an equilibrium between too high and too low, and it’s the manager’s job to determine where that point lies.  Learn to justify your value.

If the last time you raised prices was during the Bush administration – especially the first one – it’s time to do it again.  In the next post I’ll explain how to increase prices painlessly using a technique I named the Grandfather Technique.

You should raise prices each time your supplier does, and every time your market improves.  In the next post, I’ll discuss exactly how to do this.  Learn how to earn optimum profit without irritating or losing customers.  In the next few weeks I'll share how you can design advertisements that work; avoid high printing charges; learn how to calculate your clients' value to your business, and much more.

Until then,
profitable business All!

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6 comments:

  1. I've just read through all of your posts and want to thank you for the excellent re-focusing wisdom that's in each one.

    A topic that's of interest to me is staffing levels. What metrics should we use to determine when we need to hire additional help or to determine if we are overstaffed?

    Again, thanks for your excellent blog.

    ReplyDelete
  2. Scott,

    Thanks for your readership and your question. I intend to address staffing levels at a future point. The measurement to determine when to add staff is one of capacity and I'll show how each person can derive the equation unique to their business in later posts.

    My approach to staffing is unconventional and, frankly, somewhat irreverent. I concentrate on building the bottom line by eking out every scintilla of profit from your current transactions and adding new customers. The goal is to accumulate a war chest with which you can add staff and equipment as needed.

    Thanks for your support. Please feel free to share this with anyone who might benefit. Stay tuned!

    ReplyDelete
  3. Yeah a lot of people try their best to lower prices but sometimes the customer actually would pay more.

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