KMA Goldmine TV Episode 36 – Increasing Your Profitability using Prices

“KMA GOLDMINE TV EPISODE 36 – Increasing Your Profitability using Prices”

 

 

In this video Kim talks about the impact that increasing your prices has on your business and why people find it hard to do?

 

Hi, I’m Kim from KMA Accountancy. I often get asked by clients about increasing their prices. They’re usually very reticent to do it. So I just want to talk to you for a moment about why it’s a really good idea and how to do it. Increasing your profits can be really easy by increasing your prices, goes without saying really, doesn’t it? You’d be amazed at how many people think that they need new customers, but actually they just need to focus on their prices. Now the best way to do this is to make sure that you’ve got a strong brand. So you really need to know who your customers are. Why do they buy from you? What do they really value about you and your product or service? So when you’ve got that really strongly, then it’s a case of, obviously, how they go about finding you. But in terms of pricing, it’s really about making sure that you stand out in the marketplace and there’s a clear identifier that makes you different to the rest i.e.your positioning. What makes your product or service better than the competition? Because if you’ve got a really clearly defined pricing strategy, it makes it so much easier to be able to increase your prices and then, ultimately as a result of that, increase your profitability of your company.

Let’s take for example this chair. What would the impact of increasing the pricing be? Well, let’s say for argument’s sake, the chair retails at £100 and it costs £60 to manufacture it, so your gross profit margin is 40%, now, if I was to increase the price, so now it’s no longer a £100, it’s £110 then when you work the numbers through, you can afford to lose up to 20% of your current clients or customers and you’d still make the same money. Now, most people usually are very afraid about putting the prices up because they worry that people won’t buy from them. They’ll lose all the customers, and actually in reality that doesn’t happen because you don’t know your customers completely. You don’t understand what they value about your product necessarily. So you know, we are not our own customer. Therefore, we can’t assume that a customer behaves in the same way that we would.

You know, there’s a number of factors that the customer takes into consideration when they’re buying our product or service. You know, can they get it anywhere else, is it a commodity? If not, and that’s why a strong brand is really important. Then they can’t get your product anywhere else so if they really want it, they’ll pay for it. And that’s intrinsic value, what do they really value about your product? Now if you’ve got a strong brand and your positioning right, then people will always want your product or service and, whilst there might be, for example, another chair around, it’s not this chair and that’s the difference. That’s what you need to kind of aim for. But even if you haven’t got your branding 100% right, don’t wait. Don’t think, well I can’t try all this. Why not test it?

Why not give it a go? Why not just try and increase the pricing because what’s the worst that can happen? Somebody doesn’t buy, well, you can always go back. You’ve not damaged your product or service by doing that. So give it a whirl, see what happens. But just remember that one point, you are not your customer and customers won’t behave in the same way that you will.

I’m Kim from KMA Accountancy.

If you want the guide that I talked about in terms of increasing prices and the effect on your business then give me a shout.

 

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KMA Goldmine TV Episode 36

That’s it for this week’s edition of KMA Goldmine TV until next week.

If we can help with anything included in this edition or if you’d like to talk to us about anything Accountancy or Business Development, please get in touch.

Call us now on 0161 410 0020.

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Get in touch

0161 410 0020
info@kmaaccountancy.co.uk

KMA Accountancy
Progress House
17 Cecil Road
Hale
Altrincham
Cheshire WA15 9NZ

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