Last night we had another successful seminar, this time themed on pricing.
The seminar is very powerful, mainly because most people do not realize the dramatic effect that price has on profit. We looked at a typical British business (based on results consolidated across the business sector by KPMG). The research shows that a typical business has a 25% gross profit (before overheads) and a 5% net profit (after deducting overheads). One of the first things we distinguished is that for a typical British business a price decrease of 10% will produce cause a such a company to go from a 5% net profit to a 5% net loss. Conversely a 10% increase in price sees profit rise by 200%.
The common concern for increasing price is that you lose customers, but our model business showed that for a 10% increase in price you could afford to lose up to 28% of your customers and still maintain the same profit. We saw that even if you lost 20% of your customers in this model, you increase your profit by 60% with the 10% increase in price.
Given that most people are prepared to pay a little bit more if you give them a good reason, the name of the game becomes establishing that value that you can provide above others, carefully choosing how you position your product or service and taking control of the price.
We looked at a variety of tactics in finding ways to increase prices, including relaunching your product or service with new guarantees or service standards; charging different customers different prices with integrity through having quality and economy versions of your product; bundling products; trade ins; charging different prices depending on the timing of sale or delivery of the product; concessions; top down pricing and decoy pricing. We looked at the cost of discounting your price.
Finally we spent time in workshop session coming up with actions to take on in our businesses.
As ever feedback was highly positive: 8/10 for overall value.
For those who missed the seminar, we are working on a video that should be ready in the next couple of months. If you would like to receive this when it becomes available, let me know by email.
February’s seminar will provide training in reading accounts. It is easy to forget that accounts were originally created as a management tool (rather than as something used for filing tax returns). Many business owners have never been taught the skill of understanding what the numbers that accounts tell them about the business. This seminar is designed to address that issue. It will take place on 27th February 7 – 8.30pm. Venue to be confirmed. Click here to register.