Your Prices Are Too Low

By: Dan Kennedy on: April 5th, 2010 9 Comments

In my last post, I pointed out the importance of time management and made the point that it’s the role of the leader of the business to push, push and push some more to keep the elapsed time between impulse and implementation to the shortest possible number of minutes.

Now I want to shift gears once again and talk about profit management and immediately make the point that the main motivating reason to be in whatever business you’re in should be profit.

If its not, you don’t belong in business. Yet as a consultant I find all sorts of people in all types of businesses who are not primarily profit motivated. They’ve got their priorities mixed up. Business decisions made with something other than profit as the prime consideration are almost certain to be bad decisions.

One profit related issue is pricing and I find that most business people under price their products and services. It’s my experience that price either isn’t or doesn’t have to be a very important factor in a consumer’s decision or the success of a business.

Personally, in fact, I like to be positioned at the high end of a price scale and have competitors focused on selling from the perspective of being cheaper instead of being better.

One of the most successful chiropractors I know is surrounded in his area by other doctors who charge considerable less then he does per typical treatment. Yet his practice is bigger and more successful than any three of his close competitors added together.

In my experience that’s not an exception that’s a rule of business. Almost every time I consult with a business one of the very first things we do is raise prices or fees. Sometimes the adjustment is pretty dramatic.

Price is the laziest and riskiest advantage to market with. Buying business with lower prices is relatively easy but keeping business obtained purely because of price is difficult. One way that most businesses can immediately increase profits is by increasing their prices. Most under price and wait too long to increase prices.

A second source of profit improvement directly linked to everything else we’ve discussed in this online course is doing more business with each customer as opposed to obtaining lots of new customers.

We’ll pick up with this huge money making concept tomorrow.

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    ABOUT THE AUTHOR:

    Dan Kennedy is internationally recognized as the 'Millionaire Maker,' helping people in just about every category of business turn their ideas into fortunes. Dan's "No B.S." approach is refreshing amidst a world of small business marketing hype and enriches those who act on his advice. For more money-making marketing tips, tactics and strategies, go to www.GKIC.com

    9 Responses

    1. My very first consulting client told me, after the close of course, that he felt I had undercharged him…”for all he was going to receive.” Interestingly, as you have pointed out so well in the past, often the client who pays the least ends up as the biggest headache! While not true in this instance, the guy has become an awesome client and friend, many times it is the people who pay the least that end up squawking and complaining the most and the loudest…no matter what you do! The hardest sale to make is the one in which you end up offering the moon and giving away the house! In fact, the client in such a transaction will often demonstrate a lack of respect for you and your product if you give too much away. There is nothing wrong with making a great living providing a quality service and/or product! In fact, you deserve it! And, the people worth doing business with long term will respect you for taking such an approach in your dealings with them.

      BTW, I loved your interview with Tom Hopkins! You guys hit the nail on the head. It is easy to make great money and a lot of sales in good times. But take someone back to the 22% interest rates for cars and homes of the late 70s and early 80s, a prime to match, and it would be a different story altogether for most! Many think this economy is rough! The recession of the late 70s and early 80s transformed the Midwest forever, the economy in the Rust Belt has, in many ways, never recovered. As you are well aware of, being from the same small town I’m from! Great stuff Dan, keep it coming!

      John Zajaros

    2. John Bruin says:

      One thing that most business owner don’t realize is the fact that increasing prices/profit allows freedom in their business. Most business owners believe that “my business is unique” and that if they raise prices they will kill their business. What they fail to realize is that if they raise prices, they have increased the percentage of profit which is not proportional to actual customers. In other words you have to lose a substantial amount of customers before you see any decrease in profits. In most cases you will lose customers but still gain considerable profits.

      Don’t be afraid to fire customers to build profit! If you raise prices and still make more profit you have just given your business the ability to better serve that 20% of your business that constitutes the 80% of your sales. These customers are most likely not motivated by price anyhow, so by servicing them better you then can sell them more frequently. This is where I’ll be quiet, so that I don’t spoil an up coming post.

    3. Rob Anspach says:

      …I really like to kick the entrepreneur who says “we can’t get those kinds of prices in this town”- and my reply is always the same…how do know? Have you tried?

    4. Scott says:

      I like the guy in NY who is known as the worlds most expensive golf lesson. $10,000 per hour. or the guy in California who charges $1,000 for one hour or $300 for 5 hours. There are all sorts of ways you can have fun w/ prices. But most in the golf industry keep charging the same as their competitors. GrandRapidsGolfLesson.com has raised prices 4 years in a row, in the middle of Michigan, with 15% unemployment, with no resistance at all. In fact, less resistance now than in 2006 when prices were much lower. Duh!

    5. Charles Ra says:

      ‘I like to be positioned at the high end of a price scale and have competitors focused on selling from the perspective of being cheaper instead of being better.
      Price is the laziest and riskiest advantage to market with.’
      how great truth it is, and quite difficult to implement.
      took me time to hit home.
      as Dan says to double the price
      triple the value to the client.
      thank you Dan

    6. Would you rather sell 1000 pairs of glasses at a $10 profit, or 500 pairs and make the same amount of profit? how about 250 and make the same net?

      base your business and USP on something other then price. Will you have less customers? yes. but so what?

    7. Rob Anspach says:

      To be honest I would rather sell 1 pair and then be lazy for awhile, then sell another pair, then take a vacation. Why work so hard selling 1000 somethings when I just need to find that person who finds value in that 1 thing I’m selling.

    8. Well,I wouldn’t go THAT far….

    9. “I have to compete on price” is an ingrained belief that most business owners have, that causes a HUGE amount of misery.

      Most are completely afraid to raise their prices, or even to add higher levels of value in order to justify higher prices.

      Which is one of the reasons, as you always point out, Dan, that most business owners are totally wrong about everything.

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