The easiest way to increase your Gross Profit per Sale is to simply increase your prices. The lovely part of this strategy is that the increase in price goes straight to the bottom line. A mere 10% increase in prices will double the net profit of most businesses.
Many businesses don’t want to increase their prices is because they are concerned about losing sales, or offending customers. True, if you just increase your prices without any other marketing, you probably will. Your customers’ reaction largely depends on how you announce the change.
So how do you increase your prices?
- Timing a price hike at the beginning of each calendar or financial year can take the sting out of price rises.
- If your business policy requires customers to sign contracts and retainers, be sure to write regular price increases into these documents.
- Give Fair Warning. Loyal customers expect to be informed in advance when a price change is coming. Post the price change on signage and on your website. You can also use the upcoming price change as a marketing tool to encourage last minute sales before prices go up.
- Let Clients know how long prices have been at the current level. Typically, customers will accept a reasonable price increase if they feel they have had a good deal with no increases for a number of years.
- Rather than a straight increase in price, you could introduce new fees. This way, you can keep the regular price on previously offered products or services while offering new services for more money.
- Watch the size of your increase. Making regular price increases that are smaller in size, and where your customers become accustomed to them, is generally a better strategy than a huge price increase every five years. Regardless, to achieve sustainable price increases, you must be able to justify the higher price.
- Support the price rise with marketing. The bigger the price rise you are seeking, the more radical the changes you must make to your marketing.
- Having different product levels is a way of avoiding the price debate with customers. For example, when you have a Silver, Gold and Platinum service or product offering, customers will compare the prices and value at each level. The price conscious will may choose Silver (with less in the box) instead of Gold, but are prepared to pay more than the entry level offering. The key is, don’t discount your Price, discount your Scope; with each level of service equally profitable.