The price you charge, more than any other business variable, has the greatest impact on the profit you earn. Unfortunately, most business owners are reluctant to increase prices for fear of losing customers.
It’s very easy for business owners to get immersed in operational issues in their business. When asked, all business owners say they’re focussed on increasing profits, but being busy is not enough. Increasing profits does not mean you should increase activity. In fact the opposite is true. You need to work smarter, not harder.
There are many ways to increase your profitability. One of the easiest is to review your pricing strategy. But many businesses owners fear that an increase in prices will lose customers. That is simply not true.
The customer’s view on price
More often than not, the seller has a greater issue with price than the buyer: price is not the driving force for customers and potential customers. Customers base their buying decision on many other factors, such as quality, service, value for money, delivery times, even methods of payment. Customers hardly ever shop on price alone.
Many studies have been done on customer buying patterns. One such worldwide survey was carried out and asked the question “Why do you choose NOT to deal with a business or leave a business and go to a competitor?” The results were fascinating. Only 15% said they shop or purchase on price alone. The majority (68%) walk away because of ‘perceived indifference’. So 7 out of 10 potential customers fail to purchase due to a perception that the business simply doesn’t care enough about them.
So why do business owners incorrectly pay the greatest attention to such a small price-sensitive group? It’s only one or two potential customers out of ten that feel this way.
Just do it
The biggest differences you can make to potential customers involve focusing on customer service; improving what you do; and being clearer about how a product or service will make a difference to their life. Once these things are in place, adapting your pricing strategy is easy – and will NOT frighten customers away. They will stay with you, benefitting from the opportunities and choices your new pricing strategies made possible.
Accru in Adelaide has recently launched a profit improvement program called ProfitSurge. Part of the program focusses on introducing pricing strategies that large corporations have successfully used for decades.
Visit www.buildagreatbusiness.com.au to find out more, or contact the author, Philip Arnfield, Accru Harris Orchard, on 08 8431 1488.