10 Steps To Success in 2012 – Step 6: Price

10 Steps To Success in 2012 - Step 6: Price

Do you understand the difference between price and value? If you are selling on price only, there is always the possibility that a competitor will undercut you. Buyers who purchase on price tend to be less loyal as a customer; next time they may also buy elsewhere because it’s cheaper. 

If you can create value in what you are offering (combined with your competitive advantage relative to the need you are fulfilling) then customers will invest in what you have to offer and will buy more from you or come back for different products/services. 

Creating value can take many guises – it could be a guarantee, or something extra for nothing e.g. a free carry case for a laptop, or something that is exclusive to your business, a special offer (not a price discount), etc – hopefully you get the idea? 

Test your pricing, make sure you are not selling too cheaply – if you have the right value proposition, price will not necessarily come into it – take Mercedes-Benz/Rolls Royce (above) for example. You can often afford to put your prices up and not impact your bottom line profits. 

Did you realise if your margin is 40%, a 10% price increase could sustain a 20% drop in sales volume without any impact on your profitability? The ‘double whammy‘ here is, that if you lose customers by putting the price up, you have just identified those customers that only buy on price (and you may not regret losing them!). 

(More information on price increasing for other margins and percentages)

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