Rating

8

Qualities

  • Applicable

Recommendation

Few aspects of business are as vital as pricing. All other things being equal, the higher your prices, the higher your earnings and profits. Given the primacy of pricing, it’s ironic that most executives who set prices don’t know what they’re doing, says veteran accountant Peter Hill. He discusses common pricing myths, explains how pricing works best and offers easy-to-implement pricing recommendations that could increase your profits. Pick the suggestions that fit your business: Not every car dealer needs to send out Christmas calendars or pens to bring customers back, though that suggestion fits Hill’s charming, down-home style. Hill says his pricing ideas “apply just as well to Apple as they do to the corner shop selling apples.” getAbstract recommends this smart, pragmatic manual to “CEOs, finance directors, sales managers, marketing analysts, accountants and strategic planners,” and to anyone who sells a product or service.

Summary

To Increase Profits, Increase Prices

To improve your profitability, you have five choices: 1) Find more customers; 2) persuade current customers to buy more; 3) cut costs and become more efficient, or become more productive, or do both; 4) increase the “average value” of your product – for example, promote package deals – or 5) increase the prices of the goods or services you sell.

The last option – simply charge more – is by far the fastest, easiest route to greater profitability. That makes good sense, but many in business refuse to accept the logic of this basic premise. They worry that raising prices will result in fewer or no sales. Customer research indicates that more people (68%) stop buying from a particular company because of “perceived indifference,” rather than because of price issues (10%).

Salespeople often mistakenly blame price when they can’t make sales, although the reasons more likely relate to other factors. When offering price quotes or project-cost proposals, for example, they seldom include enough compelling “why choose us” information; or, they don’t follow up to determine the prospect’s reaction to the proposal. A surprising number of...

About the Author

Peter Hill is a partner at Mark Holt & Co Ltd. and Healium LLP. Hill is also a featured speaker on pricing and profit improvement.


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