Your profit margins are under constant pressure from competition, customers, inflation and the economy. During periods of economic uncertainty, demand may be volatile, making it more difficult to optimize labor, inventory and other production costs.
As a business owner, you want to resist pressures to reduce prices, and do everything in your power to maintain — and even raise — prices. When demand feels less certain than usual, there are several practical ways to protect your prices and even charge more for the value you deliver.
The following five approaches take advantage of extra employees, brainpower and inventory on hand, so you can raise prices, while keeping costs fairly constant.
1. Increase Speed
Responding, executing and delivering faster can be hard work, but it can also command much higher prices. For example, Atlas Doors, an industrial door manufacturer, was able to grow three times faster and charge 20 percent more by promising faster delivery. These results were profiled in the book Competing Against Time, by George Stalk, Jr. and Thomas M. Hout. Talk to customers about ways to improve their supply chain not only with faster delivery, but also with smarter, more informed tracking of when and where deliveries will arrive.
2. Add Valued Services
You can maintain or raise prices by adding delivery, installation, customization or other customer services to your offerings. Talk to customers about how they use your products and services. What would drive greater preference for your products? If you can customize your offering to their specifications, you will often secure the relationship and the margin.
3. Provide Education
Teaching clients how to use your products adds value by helping them appreciate all the features, benefits and uses of your products, and you can raise prices or charge a fee for the classes or one-on-one training. Speak to your customers and coordinate information sharing on how to use the product most efficiently. Companies like Apple give regular classes in their stores on how to use their premium-priced products to record music, manage a business or produce videos. If you sell a complex product such as computers or software, offering technical training is a great way to increase revenue and add value. You can do training up front, as well as on an ongoing basis.
4. Bundle Products
Cross selling is, in fact, the most efficient way to sell. If clients already buy one product from you, they’re going to be more receptive to buying another. Explore your inventory, suppliers and business partners to find ways to combine complementary product pairings into bundles, like “chips and dip” and “batteries included.”
5. Innovate Packaging
How you package your products and deliveries is often an area that business owners overlook when innovating. Think through how your customer receives, stores, uses and recycles your product. Are there opportunities to eliminate steps or innovate the packaging to improve loading, storage, restocking or clean up?
This article is general in nature and does not constitute legal, tax, or investment advice. SunTrust makes no warranties as to accuracy or completeness of this information, does not endorse any non-SunTrust companies, products, or services described here, and takes no liability for your use of this information.