Review Existing Pricing
Review your prices
Regularly reviewing your prices and checking them against your competitors can be an effective way of increasing your sales, profits or both.
You should try to estimate the likely effect of different price changes on the sales, cash flow and profitability of your business before making any changes. To do this successfully, you need to understand:
- the ‘cost structure’ of your business (including regular ‘fixed’ costs, and ‘variable’ costs that change according to your business’ activity)
- the value your customers place on your products and services
Watch a video on dealing with cash flow problems, including handling late payments.
It’s worth bearing in mind that offering a discount can sometimes reduce your overall profitability, even if your sales go up. Equally, you might be able to make more profit overall by increasing prices, even if you’re selling fewer items.
Small changes to pricing like providing loyalty schemes or bulk discounts can increase sales to both existing and former customers.
A car wash offers free cleaning every tenth visit if customers opt for the deluxe service. Even though they’re giving something away for free, the value of repeat business from loyal customers means that profits go up.
It’s likely that it would’ve cost significantly more to generate the same amount of sales with new customers, resulting in less profit.
You should also regularly check the price you’re selling products and services at against competitors. This will help you find out if you’re:
- losing customers who get the same product or service elsewhere for less money
- sacrificing profitability, because customers are willing to pay more than you’re charging them