Expert opinion: Growth through pricing

Ahead of their upcoming Rise with Xeinadin seminar, Growth through Pricing, taking place on 30th January, Stockport accountancy and business advisory firm, Hallidays, explain the impact your pricing strategy can have on a business.

When you run a company, there are many tweaks, trims and tune-ups you can perform to increase profits.

But none has a greater effect than improving your pricing strategy. Absolutely none.

It’s the area many business gurus identify as the most commonly untapped profit stream for businesses – because there’s absolutely no other area where small changes can have such a dramatic effect. In fact, a McKinsey study of the Global 1200 found that just a 1% rise in prices (if demand stays the same) could increase profits by an average of 8%.

So, if you’re not employing any of the strategies described below, we guarantee you’re leaving good money on the table.

You may, of course, feel you’ve got the balance right; that you’re charging as much as your customers (and the market) will tolerate. But how scientific is that feeling?

Because the simple truth is that customers’ minds don’t work in the way that your instinct tells you they do.

Multiple studies have shown that Price, in isolation, is a relatively meaningless figure. The human mind can’t process absolute figures – we’re conditioned to focus on differences, contrasts and changes.

And while a small number of your customers may indeed buy on price, when you take into account the Pareto Principle – 80% of your sales come from 20% of your customers – are these tyre-kickers really worth your effort? They can’t afford you, they don’t value you and they’re often the hardest to get payments from.

Wouldn’t it be better to: a) work on attracting those who are prepared to pay for what they want? And b) use price queries as an opportunity to explain the value you offer?

Because if your customers baulk at a little price increase, there can only be three reasons why:

1. They can’t afford you
2. There isn’t enough value in your offering
3. You haven’t communicated the value

Continue reading on the Hallidays website.