Overlooked benefits of price analysis
Feb. 21, 2013
A common misconception about pricing is that it’s all about establishing the price. In a recent project my client and I improved their margin by 56 percent without raising prices. How did we do that?
Determining value requires a thorough understanding of the process through which that value is created. In this particular instance we mapped the process and discovered that the sales process and backend billing/collection processes were so time-intensive that they severely reduced the profit margins on the work being performed. The 56 percent margin improvement was the result of streamlining those processes.
More good news
As if that weren’t enough of a margin improvement, we also discovered that there is a strong possibility of getting a 12.5 percent price increase. The value for that price increase lies in my client’s ability to save their customers time. Indeed if customers did the work themselves, they’d be working for less than $10 per hour.
This knowledge allows us to initiate a customer profile to help us decide where to advertise this service, what the marketing message should be as well as how to price the service. That’s a lot of benefit from one activity.
The moral of this story is that whether you’re selling B2B or B2C, there are a lot of benefits to be gained from revisiting your pricing.
Dale Furtwengler is a professional speaker, author and business consultant. His latest book, "Pricing for Profit," is dedicated to helping organizations break the bonds of industry pricing.