Available from B2B International USA Inc
There are three ways of increasing profits: sell more, cut our costs, or raise existing prices.
Selling more and cutting costs are not easy, but raising prices, in principle, is very easy indeed - change the price ticket and price list and tell the sales force to raise prices by 5%. Costs remain the same and therefore the 5% price rise becomes an immediate 5% profit increase!
Of course, we all know that there is an inverse relationship between price charged and volume purchased. Once we increase prices, customers may start to look elsewhere for a better deal.
It is therefore useful to broaden the discussion and think about value – the trade-off between the benefits a customer receives from a product or service and the price they are willing to pay for it. Customers rarely buy on price alone – rather, they are driven by the disparity between the package of benefits they receive and the price they are charged for them.