Two of the main ways you can improve your profits are to reduce your costs or increase your selling price. It’s not complicated but the latter is often seen as a risky option and companies rely instead on reducing costs where every penny saved drops straight to the bottom line.
This might seem like the easy option but when your business has already made cost reductions, efficiency gains and investments to produce faster, better and leaner; finding that extra gain becomes increasingly difficult.
Many companies are reluctant to increase their sales prices for fear of losing business and, as result, find themselves selling at the same price – sometimes for a few years. But labour, energy, rates, and general costs have all tracked inflation during that time and it doesn’t take an economist to know that this margin erosion cannot continue indefinitely.
It is not unusual for print companies to have strategies around productivity, investment, sales and growth and yet little or no strategy on pricing. If this describes your business you should read on.
The good news
The good news is that clients do accept higher prices over time. For example, your business already supplies at a higher price than you were ten years ago – otherwise you would almost certainly no longer be trading. Maybe these price increases have taken place through need, paper increases, change of product mix or even different clients but the result is the same. Your clients are paying higher prices. This is indeed good news.
Overcome the fear – manage the risk
Recognising that most clients pay more over time, it becomes a much smaller step to decide how you can take more control of how your business is rewarded for its efforts. What stops most businesses from increasing prices is the fear of losing business to a ‘cheaper’ competitor – a common symptom of an industry that has endured over-capacity for many years. It is easy to forget about the risks the client may face if they choose to switch supplier and you can balance this against the fear of losing business.
Strategy and confidence are key
Having a robust strategy and confidence are critical to make the right pricing decisions whilst managing any risk. Part of this strategy is understanding the value of what you do for your clients and it is difficult to have this perspective from within your business. This is where we come in.
Using proven techniques, we help you to manage this balance by developing a strategy, tailored to your business, that allows you to make sound decisions on pricing. A sound strategy manages risk and, in turn, boosts confidence. Do this well and your business will see an increase in its margins.