One of the most common things sales people say in times of recession is "Our price is too high". Have you been tempted to lower your prices to increase revenue and sales, and to try and eliminate competition?
Here Are A Few Risk of Reducing Your Price
1. Profit
Picture this….. Your product cost you R80.00 per unit to produce. Last month you sold 50 items at R100.00. In an attempt to increase sales, you have decided to reduce the selling price to R90.00. And your sales did indeed improve to 60 items sold. Yet you feel worse off. Is that possible with higher sales turnover figures?
|
|
Last Month |
This Month |
|
Cost Per Unit |
R 80.00 |
R 80.00 |
|
Sales Price |
R 100.00 |
R 90.00 |
|
Items Sold |
50 |
60 |
|
Total Income |
R 5,000.00 |
R 5,400.00 |
|
PROFIT |
R 1,000.00 |
R 600.00 |
|
Margin % |
20% |
11% |
But you’re no quitter! Next month you will simply push harder for more sales. Makes sense, right? Wrong:
|
|
Last Month |
This Month |
Next Month |
|
Cost Per Unit |
R 80.00 |
R 80.00 |
R 80.00 |
|
Sales Price |
R 100.00 |
R 90.00 |
R 90.00 |
|
Items Sold |
50 |
60 |
100 |
|
Total Income |
R 5,000.00 |
R 5,400.00 |
R 9,000.00 |
|
PROFIT |
R 1,000.00 |
R 600.00 |
R 1,000.00
|
The upside in volumes in many cases and as illustrated above will need to be double for things to even start making sense, there is also a knock on effect to other areas in your business.
2. Reputation
As soon as you cut your price, you bring other challenges to the table, these could include your perceived quality of your products and services being questioned, you set the precedent for your future negotiations . Added to that, many of your long-term customers may conclude that you were over-charging them previously, and you may lose them.
3. Competition
Your competition is facing the same challenges as you. Once they spot that you have lowered your prices, they will also lower their prices. Which leaves you back at square one.
Look Within Before You Go Without
If you know your value and what sets you apart, you are able to justify your price.
If you need assistance on how to structure your pricing or to position yourself against your competitors, contact me today!
For more information about business coaching and business consulting services, contact me: 083 256-0378 | This email address is being protected from spambots. You need JavaScript enabled to view it.
Thanks for reading. Please feel free to like, comment, share, tweet, retweet, pin, quote, email etc. If you would like to receive insights like these, plus additional exclusive content delivered to your inbox, remember to sign up HERE.
