What's Ailing Your Business?
You've got customers, but still no profits. Or maybe you're in the black, but just scraping by. If you haven't developed a sustainable business model or growth plan for your business, keep reading for the 3 rules you need to know to stay on top of your game.
RULE #1. Increase Perceived Value Before Lowering Prices
Basically, this means: try to be better at what you do, instead of charging less to do it. Every percentage change in price can have a monumental (and sometimes unwanted) effect on profits. And, reducing prices can sometimes undercut a company’s image in the eyes of consumers by signaling that the product or service isn’t worth what you were charging before. On the other hand, competitive positions built on greater differentiation and higher perceived value through personalization, customer service, or brand reliability strategies are more likely to drive exceptional performance than positions built on lower prices. Things to try:
RULE #2. Seek More Revenue Before Lowering Costs
Companies must not only create value but also capture it in the form of profits. Exceptional companies can achieve superior profits by generating higher revenue than their rivals, through either higher prices or greater volume. Very rarely is cost leadership—reducing input costs to increase margins—a driver of optimal profitability. Things to try:
RULE #3. Try The Other Strategy
If your goal is profitability, this third rule should be your mantra to avoid price wars and non-strategic cost cutting. Because trying to lower costs or competing on price tend to be 'no-win' games, if you've tried one of the options above, try the other. Of course, many factors can influence company performance, but implementing one of the two strategies above (instead of lowering prices or reducing costs) tends to offer the best outcomes for most businesses.
If your business is ready to implement one of these strategies, get started by getting your FREE business plan audit from Brio.
Want more tips like these? Subscribe below.
RULE #1. Increase Perceived Value Before Lowering Prices
Basically, this means: try to be better at what you do, instead of charging less to do it. Every percentage change in price can have a monumental (and sometimes unwanted) effect on profits. And, reducing prices can sometimes undercut a company’s image in the eyes of consumers by signaling that the product or service isn’t worth what you were charging before. On the other hand, competitive positions built on greater differentiation and higher perceived value through personalization, customer service, or brand reliability strategies are more likely to drive exceptional performance than positions built on lower prices. Things to try:
- Differentiate your product (tell customers how you're better than the competition)
- Rethink your value proposition (What's in it for your customer? It had better be good!)
- Get more strategic about your marketing (use integrated campaigns or digital retargeting to talk to the right audience with the right message)
RULE #2. Seek More Revenue Before Lowering Costs
Companies must not only create value but also capture it in the form of profits. Exceptional companies can achieve superior profits by generating higher revenue than their rivals, through either higher prices or greater volume. Very rarely is cost leadership—reducing input costs to increase margins—a driver of optimal profitability. Things to try:
- Increase your qualified leads (Where else can you market your product/service? Where can you dominate/create new markets?)
- Check your sales funnel and customer experience (eliminate the barriers between your target customer and a sale)
- Do a pricing analysis (Are you under-pricing for what you sell vs. what you provide? How about when compared to competitors? )
RULE #3. Try The Other Strategy
If your goal is profitability, this third rule should be your mantra to avoid price wars and non-strategic cost cutting. Because trying to lower costs or competing on price tend to be 'no-win' games, if you've tried one of the options above, try the other. Of course, many factors can influence company performance, but implementing one of the two strategies above (instead of lowering prices or reducing costs) tends to offer the best outcomes for most businesses.
If your business is ready to implement one of these strategies, get started by getting your FREE business plan audit from Brio.
Want more tips like these? Subscribe below.