You Deserve Higher Prices 2
Article posted on 22nd February 2006
In my last newsletter I wrote about what I learnt from Sir Owen Green at BTR and how I believe you deserve higher prices.
You will be interested in an e-mail I received just before New Year:
"Roger,
Thanks for your last newsletter retelling the Owen Green story. I had forgotten it.
It just so happened when I got it that my management team were preparing their 2006 business plans.
Hence, I couldn't resist implementing it ?
'What difference would a 1% increase make?'
'None' came the resounding answer.
'OK - well I suppose you'd better do it, then!' I said.
You'd have been proud of me, Roger ! I could hardly keep a straight face.
But WHAT A DIFFERENCE IT WILL MAKE TO US IN 2006.!!!!!!!
- especially when you see the success already achieved in 2005 - after I attended your workshop, of course - a margin increase of 9%.
Keep those newsletters coming .They work.
All the best for the New Year,
Martin Mulligan, CEO, Martin Mulligan Group Limited"
Wow! - what do I say? Except to repeat that you clearly do deserve higher prices!Continuing on that theme I do find that when people are putting forward their arguments to resist increasing prices they tend to argue around their largest and most important customers and how they might react. This may of course be perfectly valid but for most businesses the 80:20 rule applies with 80% of their business coming from 20% of their customers. However this also means that they have a long "tail" of less important customers who may be buy less frequently, are less sophisticated in monitoring prices and in some cases are expensive to deal with because of low order values etc.
The maths of are simple: if you increase your prices to these customers by 10% (which I suspect will be perfectly possible to do) that will put two whole percentage points on the bottom line. Just think how hard you struggle to gain that sort of a profit improvement by cost reduction, margin improvement and new sales growth.
Go for it!
© 2006 Roger Harrop Associates
Speaker of the Year with the Academy for Chief Executives, Roger Harrop is a former plc CEO, international speaker, author, business adviser and consultant. He is an expert on sustainable profitable business growth. Get your free e-book "Everything you wanted to know about profitable growth but didn't know whom to ask"
