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Increasing Your Profit – Without Changing Your Product

July 24, 2012 by Kevin Custer

In this economy, the idea of increasing your prices may seem suicidal – and indeed, raising them indiscriminately will probably backfire. However, it is possible to set your prices in such a way that you can increase your profits without changing your product or tinkering with your overhead.

Traditionally, setting a price for a product or service is an exercise in figuring out your costs and deciding how much profit you can get while remaining competitive.  While this tried-and-true method is still the way to go for most products and services, there are times when you can flip the concept around when offering premium services and products.  Look at the value your product provides to a school and ask yourself (or them) what they would not have to purchase if they had your service.  Prove to them, for example, that they can forgo $10,000 worth of supplemental materials by going with your service, and adjust your price accordingly.

Additionally, don’t forget to take into account the perception that premium pricing can convey. Think about the $10 or $15 hamburger you will pay for at a nice restaurant. If you then see a $2 hamburger at a similar restaurant, chances are you will avoid it, thinking that it will be nowhere near the quality of the $10 burger.  In other words, if you set your price too low, your customers may no longer appreciate the product’s quality and value.  For example, an online training product for para-professionals working with autistic children was originally priced at $200 per person or $2,000 per district. Though this training would save districts tens of thousands of out-placement trainings annually, sales were slow until the price was moved to $495 a person or $25,000 a district and 2 half-days of onsite training were added. Sales increased as the perception of the product’s value was now much closer to what schools were accustomed to paying.

So as you work on prices for new or existing products, keep in mind your ability to charge premium prices for premium services and products. Don’t be afraid to tell customers that, as an elite company, you only work with 5 or 10 schools and charge them $7,500 a year. It may take a while to get to that point, but think of the improvement when you get there. And until then, don’t hesitate to offer some “pilot site discounts” to the very special customers that are willing to get in on the ground floor.

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