Unknown Speaker 0:00
As a consultant study across 1200 major businesses found a one to 2% increase in price gave an average 11% increase of profit with no other major change. How is this possible? What can we learn about implementing these practices in our own business operation, and in order to get this remarkable profit boost? Stay tuned for more on this shortcut to profits.
Unknown Speaker 0:30
Hello, I'm Scott Williams, founder of profit savvy.org. When you have a medical problem, you go to a doctor, and she asked you to describe the symptoms. Based on this you get offered a treatment for what ails you, and profits heavy, we use the same approach. Our diagnostic menus on the website quickly lead you to suggested remedies for whatever issues you are facing in your business. This saves you an enormous amount of time wading through books trying to find a treatment for your business's particular issues. Our focus is on owner operators and middle management of larger businesses, we assume you have the necessary technical skills. So we focus on helping with management issues. In this podcast series, we touch on the most popular issues from our website.
Unknown Speaker 1:23
The methods of this outcome is pretty straightforward. Let's say you have a revenue or turnover of $500,000. And you make 5% profit on that, which gives you a $25,000 profit figure. An increase in price of 1% means an increase in revenue of $5,000 1% of $500,000. All this goes to entirely to profit because your costs have not changed. Just your price has gone up $5,000 more profit on a starting point at $25,000. Profit is a 20% improvement. So we have a 1% increase in price and a 20% increase in profit. Not a bad return. You can do this on your own figures. Of course, with a quick calculation on the back of an envelope. Do you think your customers can live with a 1% price increase, assuming they even notice? Well, increasing prices and not losing customers can be even simpler than you might have thought. We talked about the 8020 rule also known as Pareto Principle, in podcast number 12. Pareto tells us that it's very likely that just 20% of our product range generates 80% of our revenue. So all we have to do is increase the price of that 20% rather than the full 100% of our product range, and get much the same results as we would with a full range. So it's getting easier and easier to increase our profit, the price change. In our article on this topic and profit savvy.org We give three broad brush ways to achieve a price increase without annoying customers. And broad strokes. They are number one switch from market pricing to value pricing. Many prices markup everything by say 30%. But this ignores the fact that people with different needs and desires will pay different prices for the same goods and services. So can you differentiate a value charge more for some things, make more profit and still have a happy customer. Consider this example. The exact same house has one value for the owner occupier seeking comfortable quarters, and quite a different value for an investor thinking how well it would rent out to her target renters. Same house, same condition, but different value, you might get more for your house by positioning it with the best paying via option number two is to use the same pricing idea that you but you might offer versions for your product or service. There's always going to be the bargain shopper who wants to lower price. But there are others who will buy quality or brand names for example, we see this with cars otherwise no one would be buying a Rolls Royce. A third option is to offer different purchase plans. Some people will pay cash, others will want terms but we'll pay the equivalent of interest for that right. Still others are interested in the quote all you can eat unquote strategies that some restaurants offer and profit savvy.org We introduce an author who has 14 Such pricing strategies. Some of those might suit you. So back to our original theme. spending a bit of time thinking How did you get just 1% better price from just 20% of your products might easily Use 15 to 20% increase in profit. A sample of 1200 businesses earn an average of 11% more, visit the 1% price increase article in profit savvy.org. For more on this topic
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