by Dr Greg Chapman, MBA
At a course on devising strategy last year, whilst reviewing a case study of a business which was facing a number of strategic choices, the facilitator asked whether there were any accountants in the room. A few put up their hands. He pointed to one of them and asked: “How do you think they should increase their profit”
The accountant answered: “They should reduce their costs”.
Then the facilitator asked if there were any marketers in the room. I was among a few who raised their hands. He pointed at me and asked how the business should increase profit.
I answered: “They should increase their prices”, knowing the point he was about to make.
Everyone laughed at the different approach for the accountant and marketer. The facilitators point was the importance of different viewpoints, something with which I strongly agree. There is also a right and wrong time for either approach.
However, I do believe that increasing sales is a more direct route to profit in any reasonably run business where the costs have not blown out of control. You can only squeeze prices so far without compromising the product quality or service which will then have a negative impact on sales.
Increasing sales, on the other hand, is a potentially unlimited strategy. Sales can be doubled or tripled or more, but halving costs can be extremely difficult.
There are basically 5 ways to increase sales, represented by the 5 Turnover Drivers
1. Increasing Enquiries
2. Increasing Conversions to Sales
3. Increasing the Average Value per Sale
4. Increasing the number of times a customer buys from you
5. Increasing your Prices.
The last turnover driver is probably the most powerful, but also the most difficult to implement.
The most powerful, because even a 10% increase in your prices could double your profit.
The most difficult to implement as the risk in losing customers may well result in an overall revenue loss, unless strategies are adopted that allow your higher prices to be defended.
In Price: How You Can Charge More Without Losing Sales,
there are 57 strategies that are revealed. Strategies for every kind of business: B2B, retail, manufacturing and professional services (including accounting!)
Learn the professional marketing secrets of the big brands in your sector and stop being a Price Taker.
May Your Business Be - As You Plan It.
Over to You. What do You Think? Post Your Comments Below.The accountant answered: “They should reduce their costs”.
Then the facilitator asked if there were any marketers in the room. I was among a few who raised their hands. He pointed at me and asked how the business should increase profit.
I answered: “They should increase their prices”, knowing the point he was about to make.
Everyone laughed at the different approach for the accountant and marketer. The facilitators point was the importance of different viewpoints, something with which I strongly agree. There is also a right and wrong time for either approach.
However, I do believe that increasing sales is a more direct route to profit in any reasonably run business where the costs have not blown out of control. You can only squeeze prices so far without compromising the product quality or service which will then have a negative impact on sales.
Increasing sales, on the other hand, is a potentially unlimited strategy. Sales can be doubled or tripled or more, but halving costs can be extremely difficult.
There are basically 5 ways to increase sales, represented by the 5 Turnover Drivers
1. Increasing Enquiries
2. Increasing Conversions to Sales
3. Increasing the Average Value per Sale
4. Increasing the number of times a customer buys from you
5. Increasing your Prices.
The last turnover driver is probably the most powerful, but also the most difficult to implement.
The most powerful, because even a 10% increase in your prices could double your profit.
The most difficult to implement as the risk in losing customers may well result in an overall revenue loss, unless strategies are adopted that allow your higher prices to be defended.
In Price: How You Can Charge More Without Losing Sales,
there are 57 strategies that are revealed. Strategies for every kind of business: B2B, retail, manufacturing and professional services (including accounting!)
Learn the professional marketing secrets of the big brands in your sector and stop being a Price Taker.
May Your Business Be - As You Plan It.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
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2 comments :
Nice article.
As an accountant and a marketer I can understand the emphasis placed by either group.
Wearing my accountants hat, reducing prices seems so much more controllable and doable than battling a sales price increase through a salesforce convinced that price is already too high.
Nice article.
I can also understand the difference small business accountants approach to the marketers. It is more easier for an accountant to reduce prices, but opposite for a marketer.
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