Six Things To Improve Your Sales And Price Position

Here’s a pithy article by Robert Imbriale, a Marketing Consultant
and author of The Business Hotline, and another favorite from the Professional Pricing Society Archives. In this competitive and slowing economy, any strategy you can capitalize on to give you a cutting edge will be important, and applying proven, best practices is always a smart approach. Cheers, EM

Six Things To Improve Your Sales And Price Position

#1 Add More Value To What You Sell
Have you ever heard a customer ask you, "Is that all I get for this price?" Chances are you have. It could mean that you are not offering enough value for what you are charging, or it could be a misinformed client. What can you do to add value to your products or services? Try adding value by including items that cost you very little or even nothing at all. Think of creative ways in which you can add value to your base product or service offerings.

#2 Offer Items Of Complimentary Importance With Each Purchase
This is one of the most profitable things you can do to increase your average unit of purchase. You accomplish two things by offering complimentary products or services. First, you add value to your products or services by offering items that you know your customers will need to buy at some point. And you are saving them the trouble of having to go to another business for these items. If you sell cameras, offer batteries, film, protective cases, and other useful accessories at the time of purchase. In a service business, you can offer products that enhance your service.

#3 Sell Upgrades
Upgrades differ from complimentary products in that they are generally a better version of the same product as opposed to a complimentary or "add-on" product. In the computer industry, this is done all the time. There is no reason that you could not apply those same.

#4 Use Risk Reversal
Here's a really powerful way to increase your sales, but you have to think this one out carefully. Offer your products or services as risk free as possible to your customers. You may offer a full money back guarantee, as opposed to most companies that offer only 30 days. The rule of thumb is to keep the risk to your customer as low as possible. Returns on quality products have proven not to increase proportionately with sales, so don't worry about being overwhelmed by returns, it won't happen!

#5 Create Special Offers To Past Customers
The most profitable market is your past customers. They have already participated in business transactions with you and have developed trust in your operation and in your products. Why not take full advantage of this fact by developing specials for "preferred customers?" If you negotiate a special deal for some product or you are planning on carrying an entirely new product line, why not let your preferred customers know about it before the rest of the world? Go a step further and offer them special pricing on those products or services if they act before a specified date.

#6 Market Payment Terms
Do you offer your customers various payment options? The more flexibility you have, the better off you will be. Leasing is an easy option to set up with the large number of leasing firms in business today. Offer as many payment options as possible so that you totally remove payment as a barrier.

These and numerous other pricing resources are available to members in the Professional Pricing Society archives.

Fundamentals of Pricing Strategies and Tactics

A timeless article on pricing strategy that I wrote more than 20 years ago. Notice how pricing strategies have long shelf lives. Warmly, EM

The following five factors should be considered when establishing a pricing strategy:

Competition: Who is your competition? How many competitors do you have? The number of competitors you face can often be more important than who they are,especially when involved in a bidding process.

Customers: Should you differentiate pricing according to customer class instead of service or product? This practice is more and more common as most businesses have several classes of customers, some of which are price sensitive, while others are not.

Financials: What are your gross margins on products and services?

Perceived Value: Do your customers perceive a difference between your services and those of your competition? If so, are they willing to pay for the difference you offer?

Marketing Objectives: What are your primary and secondary objectives? Obviously, some of your objectives will conflict. It is your role to resolve these conflicts by determining and communicating primary and secondary objectives. You instinctively know which objectives are most important, but your people require constant direction to maintain their focus. In addition, quantify your objectives whenever possible.

Click to read the full article: Fundamentals of Pricing Strategies and Tactics

The Top 5 Myths of Strategic Pricing

Below is a summary of the article "The Top Five Myths of Strategic Pricing." This article By: John E. Hogan and Joe Zale is one of PPS' favorites from its Pricing Advisor Newsletter Archives.
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Across the board, managers have absorbed these “worst practices,” and they unknowingly make poor decisions that undermine their businesses. A common reason for such poor decision making is that managers carry those rules and techniques from one competitive environment into another.

What may work in one situation becomes merely myth in another. Are you buying into any of the following myths?

Myth 1: You can’t raise prices and volume at the same time.

In many companies, executives believe demand curves (i.e., price and volume) are fixed. This leads into the trap of thinking that optimizing price and volume is the only hope for driving profit. However, price optimization is only a small piece of the answer. It’s actually possible to hit multiple points on a demand curve with one product that will drive both volume and price simultaneously. This can be accomplished by creating tiered offerings that break products and services into different bundles that attract different customer segments.

Instead of a one-size-fits-all product offering and price, multiple product offerings and price points can be created. The result is higher prices for premium offerings and higher volume for the standard offerings. The net effect, if orchestrated properly, is significantly higher overall profits.

Myth 2: Pricing more profitably means having to raise prices.

Structuring prices to encourage cost avoidance is another way to price more profitably without actually raising prices. Big opportunities to improve profits lie in areas not often considered in the realm of pricing. By that, we mean service features that often get wrapped into a company’s offering, such as rush orders, financial terms, warehousing and technical support.

Instead of bundling services into a product offering like an “all you can eat” buffet, positioning them as a la carte upgrades can help improve profits through cost avoidance. Customers will think twice about paying for services they don’t actually value. The net effects are to lower cost-to-serve and increase share from customers who forgo services, and increase revenue from those who value these services. When you add it all together, this approach can yield big dollars in profit improvement.

Myth 3: Prices should be set to cover total cost plus some target margin.

The goal of pricing is not to cover total costs. Our clients often struggle with this challenge because the concept is counterintuitive and the mistake so pervasive in companies. Instead, the goal of pricing is to maximize total contribution (i.e., unit price minus unit variable costs).

Why? Because the portion of price that affects profitability is contribution margin. Whether that contribution exceeds or falls short of profit objectives is not a pricing issue. In other words, allocating fixed costs within the price does not help make better pricing decisions because those costs are not actually incurred when making additional sales.

Myth 4: You should drive volume in a high fixed-cost business.

On the surface, this statement is true; however, there is a trap. We see many high fixed-cost businesses becoming more variable over time, and yet they are not adjusting their management thinking to reflect that change.

Myth 5: The prices you can charge are proportional to increases in product performance (e.g., quality, speed, costs).

While it sounds simple, many people fail to remember that product improvements are not proportional to the value they deliver. Superior performance can command superior pricing.Product managers often get fixated on a customer’s willingness to pay and worry too much about a product’s pricing history.

In particular, we find market researchers guilty of this mistake, providing recommendations
that leave significant value on the table for their clients.

Access the full article "The Top Five Myths of Strategic Pricing."