Raise Your Prices 10%
Raising your selling prices will increase sales when your product or service has an inelastic demand curve i.e. when you raise prices and there is minimal or no change in volume sold. This is a profitable strategy when higher prices produce greater gross profits due to increased profit per unit, even if volume has fallen.
Additional benefits of increasing prices include:
- Raising your prices can move you to a more upmarket clientele.
- Allows you to distinguish yourself from your competition.
- Increases the perception of quality so can actually lead to increased sales volumes (in some cases).
- Eliminates low quality price sensitive customers.
- Allows you to sustain your desired profit margins.
- Price increases may position your product or service as a 'premium product'.
Factors to consider:
- Determine whether your product or service has an inelastic demand curve – there is no point increasing your selling prices if it results in a substantial decrease in volume sold.
- Find out what your competitors are offering and their current pricing.
- Determine your objective in increasing prices – i.e. to increase sales, increase gross profits, increase the perception of quality, etc.
- Calculate the financial effect of higher prices and lower volumes on your gross profit and net profit.
- Increasing selling prices often requires the business to increase their service levels at the same time.
- Consider the effect of increasing prices on business reputation, brand quality, and credibility.
- Limit the initial selling price increase to 10%, and monitor the effect on sales, gross profits, and net profit.
Similar posts you may like
- How to Find an Accountant That will Save You Tax
Many accountants are just compliance based form fillers and don’t have the expertise or aptitude to save you tax. Finding a good tax planning Read more
- Increase your sales with sales training
Sales training aims to improve the salesperson's effectiveness when dealing with a potential customer by enhancing their product knowledge, communication and presentation skills. Generally, Read more
- First State Income Tax (1880)
Tasmania was the first state to introduce an income tax in 1880 to raise revenue due to a fiscal crisis. The tax took Read more
- The Danegeld Land Tax – 810
The Danegeld, or Dane tribute, was a tax raised to pay tribute to the Viking raiders to save a land from being ravaged. The Read more
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2