YOU CAN SEE IT NOW, another sale sign out front of a retail store. For some strange reason people believe that dropping their prices will make them more money. It’s crazy … clear more stock yes, get you a job yes, build revenue yes, but make you more PROFIT … absolutely not.
Dropping your prices is the fastest way to put yourself out of business. Let me explain why I say the opposite, “stop discounting and put up your prices”.
First, you as the owner are by far the most wrapped up in your prices, you probably even answer the phone by telling people the price and they say, ‘I’ll call you back’.
Trust me, people do ask for the price but that doesn’t make them a price shopper. How you answer them will turn them into either a price shopper or a good long-term customer.
Here’s what I want you to do instead. When they ask, for example, ‘How much for a set of tires?,’ you respond with a simple line, it’s the magic line for turning price shoppers into great customers in every business.
“Thanks for your call, just so I can help you best, would it be OK if I asked you a couple of questions?” Then, guess what? You ask questions that focus on needs and value, rather than price.
In the tire example, ask about driving style, about whether kids ride in the car and so on.
Next reason for putting prices up rather than discounting: right now most business owners focus on the 5% to 20% of customers who complain about their prices. You’ve got to forget them and focus on the other 80 to 95% of your business, where price is NOT the central issue. One issue yes, but not the central issue.
Imagine this, if you went out to buy a new iron, do you assume the cheaper one is better than the most expensive?
NO, the more expensive it is the better it is in the mind of the customer. Now, you had better deliver to back up your prices, but get this clear, people don’t want the cheapest, they want the best value.
Next point, every time you attract a new customer with a sale price, what sort of customer do you attract? One that has no loyalty to you and your business, and one that will be drawn away from you with another cheap offer.
If you want to remain in business long term you have to make profit. If you want to make profit you have to raise your prices.
I’ll bet that if you raise prices by 10% on the 80% of your products or services that are the slowest moving (leave the high volume stuff where it is for now), more than 80% of your customers won’t, even notice. And where does that 10% go?
Straight to your bottom line.
Start using the magic sales line, start asking people questions that focus on value rather than price and you will win far more business at a far higher profit.
If you have to offer a special deal, don’t take CASH off the price, throw something in. Look at it this way, if you gave someone a 10% discount on a $200 bill, that’s $20 cash you lost out on.
What if you gave them a product or service valued at $20, what would be your cost in cash terms then? That’s right, less than the $20… Give away value NOT cash…
One last thing to do for this month: start to measure your conversion rate.
That is the percentage of people who enquire (walk into your shop, call your office etc) who actually buy. I remember one of my clients who, just by measuring his conversion rate, increased sales by 28%.
Article reprinted courtesy of My Business Magazine
