Pricing sounds so easy in theory, but ever so difficult to
do in the real world. Actually, up to now, it’s been impossible for
small-to-mid-sized businesses to do it in the same manner as the Fortune 500.
Perfect pricing does more than just maximize profits -- it
leverages them. Here’s how...
Let’s say that you have a net profit margin of 10% (i.e.,
after all expenses, including overhead, etc.). If you could increase the price
by 10% without losing a single sale, you would obviously increase gross income
by 10%. But that 10% increase in price increases your net profits by 100%!
And you’d still keep a happy customer who will return again
and again. Talk about a win-win situation!
But there are two big ifs in there...
... If you don’t lose a single sale
and…
... If your customer is still thrilled with your product.
How can we be sure of those ifs? Where do we find the
Perfect Price? Simple… with the customer.
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Pricing Isn't All Logic. Discover The Hidden Pricing Tactics You Can Use To Increase Profits!
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Picture this...
You have a glass of water to sell. Imagine yourself selling
it next to Niagara Falls. Now, put yourself selling the last available glass of
water in the middle of... the Sahara Desert. No rocket-science here...
The most important determinant of price is what the product
is worth to the customer.
So many companies forget this nowadays. So let’s return to
good old Sam P. just one more time...
„The successful
producer of an article sells it for more than it cost him to make, and that’s
his profit.
But the customer buys
it only because it is worth more to him than he pays for it, and that’s his
profit.
No one can long make a
profit producing anything unless the customer makes a profit using it.”
Let’s say that Product X costs you $20 to make, market,
sell, and distribute. But let’s say that your customer is only willing to
exchange $10 for it. This is obviously not a profitable thing for you to be
selling! Contrary to what we are told by used car dealers on TV, you cannot
“make it up in volume!”
Naturally, for every product that you sell, you know your cost
of production. So all you really need to know is “what it’s worth to your
customer.” Remember, if your customer does not “make a profit” on your product,
s/he won’t be back.
Since any business thrives on lifetime relationships and not
one-night stands, you must, must, must...
Know that price point at which your customer makes a profit
by buying your product. The key word in the preceding sentence is, of course...
Know. Not “guess” or “ball park” or “gut feel”... know. What does knowing what
your customer will (and won’t) pay mean to you?
Simple... you’ll know how many widgets that you will sell at
every single price point. That means that you’ll be able to set your most
profitable price… a price with the best profit for both you and your customers.
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