Increase your Prices: from the Harrogate Accountant:

When you think about increasing your profits you probably consider winning more customers or introducing new services or products, anything to attract more business.

The thought of explaining a price rise to your customers is less appealing. You worry that customers will dessert you in their droves.

But if you look around you’ll see premium products are thriving. From the mobile phone shop to the car sales rooms or even the supermarket, the high end is more than holding its own.

The 3 types of Buyers

A study by Wharton Business School breaks buyers into 3 groups:

  • Tightwads – 24% – Driven by the lowest price available
  • Unconflicted – 61% – Average spenders
  • Spendthrifts – 15% – Those drawn to the premium option

These findings conclude only 1 in 4 buyers are truly price-driven.

Show 3 out of 4 buyers what they consider to be good value and they will take up your offer.

The Economics of raising your prices

Let’s look at an example:
Jo & John Ltd make a 30% gross profit. The directors are arguing over the prices they charge. One wants to reduce their prices by 10% to expand their customer base. The other wants to increase prices by 10%.

Consequences of a 10% reduction in Prices
To maintain the same profit sales would have to increase by 50%.

Consequences of a 10% increase in Prices
Sales can fall by 25% and still maintain the same profit.

How to increase prices and keep your customers happy

  • Research your clients to find out what they value about doing business with you.
  • Introduce a premium, with bells on, top of the range offer, building on your research findings.
  • Bundle products/services together, add extras that make it impossible to directly compare prices with your competitors.

There’s a great book called Absolute Certainty by John Haylock. The story covers a range of businesses, from entirely different sectors, that increase their prices and introduce stricter payment terms by delivering absolute certainty to their clients with fixed prices and guaranteed completion dates.

The clients of the businesses involved were fed up with unexpected bills and waiting for work to be completed. The vast majority were happy to pay a premium if they took those headaches away.

If you take the time to find out exactly what your clients want you’ll be rewarded for your efforts.

Thanks for reading the blog. If you have raised your prices please let me know how you got on by commenting below.

If you want help to increase your profits get in touch with me, Paul Bushell, on 01423 566 588, by email or click on the link and complete the form.

Paul Bushell, the Harrogate Accountant

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