Believe it or not, more business owners seem to have an issue with price increases than their customers. Obviously, I’m not talking about pushing your price up by 50%, but most customers won’t even notice a small price rise.
You don’t even need to increase prices across the board – if you increase the prices on 80% of your products or services that are ‘slow sellers’, you can leave your 20% fastest sellers until last.
Increasing your margins is the fastest way to boost profitability. Here’s how to do it.
Related: Harry Welby-Cooke: It takes money to make money
1. Start now
Introduce your increases today by 10%. Don’t draw attention to the rise in price, but if people ask, explain your reasoning and focus on the benefits of the product or service.
2. Move from discounts to add-on value
If you are constantly discounting your products or services, people may start to think that your normal prices are a rip-off. They may also hold out on buying a product at R1 000 today because they’re waiting for you to discount it to R900 tomorrow.
Instead of discounting, focus on add-on value. If you do decide to discount, make the discounted offer available to your past customers only.
3. Check your quality
If you’re not selling quality products and services, it’s more difficult to raise your margins and expect people to be willing to pay extra for them.
By only selling quality goods, you can charge more, and you also won’t need to worry about returns. Remember that the product or service must still be affordable to your customer, and you should try to make more money per sale. Ensure that the higher the price of an item, the higher the margin.
Constantly emphasise the quality when dealing with clients. Ensure that your customer base will be able to afford any new offerings, and remember that quality also needs to extend to the service that you offer.
4. Sell more big-margin items
You need to think about how much money each product generates, and then stock only those that make you the most.
When it comes to services, focus on offering those that make you the most money for the least amount of effort. Of course, this exercise only works if you know the exact margins on all your offerings. Once you do, you can shift the customer’s focus to high-margin products and services.
During the course of running and growing your business, you will need access to both short-term and long-term cash savings to pay salaries, suppliers, or even to save for a future project or large payment. Standard Bank provides a range of flexible Savings and Investment solutions, with competitive interest rates, to help you meet your business’s savings and investment needs.
5. Sell your own label
When there’s no middleman, you make more money. You can also discount your own lines when necessary to undercut your opposition. Focus on manufacturing simple products that aren’t going to give you delivery headaches or cause budget overruns, and only discount your brand periodically.
Related: ActionCOACH SA's actionable advice on how to get others to sell for you
6. Sell an exclusive label
This strategy allows you to increase your margin because your customers can’t get the exclusive brand you offer anywhere else. Don’t be too greedy though – make sure your market can still afford what you’re offering.
Look for something special that nobody else offers and make that exclusivity a feature in your marketing.
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