Are your prices high enough? asks Stephen Oliver after attending a workshop (possibly mine?) where the 'higher price vs lost profit' argument is made.He goes on to quote the great "Do Mercedes Salespeople Stay Up Nights Worrying About Low Kia Prices?" question and we know what the answer is.
"Your costs aren't going to fall just because you choose to charge less for the same service. The result of dropping your prices by 10% is to reduce your profitability by around 33%. To stay in the same place and earn the same gross profit, you are going to have to do a whopping 50% more business to cover your discount costs!" (see the table in 'Bright Marketing' or Beating the credit Crunch' if you need to make sense of this.)
RELEVANT LINKS
- Are your prices high enough?
- "Do Mercedes Salespeople Stay Up Nights Worrying About Low Kia Prices?"
17 comments:
It's not surprising that Stephen Oliver quotes your common sense approach. What is surprising, is him not mentioning/crediting you and your seminar by name, hardly good cricket!
I realise that Mercedes salespeople don't lose sleep... so nor will I.
TW
Actually Mercedes salespeople are losing sleep right now. Their wealthy repeat business, nouveau-riche clientele has practically dissapeared - 43% decrease for 2009and still dropping. Do they worry about Kia prices? Probably not, but this is certainly the first time that they've been aware of Kia's very existence...I believe.
Dave the car man
"..dropping your prices by 10% is to reduce your profitability by around 33%. To stay in the same place and earn the same gross profit, you are going to have to do a whopping 50% more business to cover your discount costs!"
Thank you Robert, this is an astounding figure, the sort of which I'm sure most businesses are unaware of. It has even broader usefulness, as one could apply the same statistic to organisational waste; time, stock, processes etc.
Imagine its potential usefulness and impact, if conveyed throughout the whole organization!
Blog entry on me performing at Suurry Chamber and telling people to put prices up:
"mutterings went round the room on this one….. not sure how convinced everyone was…."
http://thebluedoor.com/pr_blog.shtml
Thought you would like it! Have you commented?
TW
TW
There's a simple dialogue at http://thebluedoor.com/pr_blog.shtml
Robert
They actually removed the posting! Quite right too! It may be being re-written, or it may be pro tempore.
It ought to be permanent, as who, in their right mind would buy from companies that doesn't understand the concept of adding value throughout the buying cycle, or that a little "massive action" on a three day "kick-start" would enable their businesses to profit, exponentially?
How bizarre... the posting has vanished but I know it was there... if you google "robert craven blue door" then they send you to the blog but the entry has been removed!
RC
Having read the post, it was clear that the "Blue Door" author in question had not taken a little time to think about what you were saying at the event.
Although you break it down into succinct and highly usable tools, most business minds are focused on the wrong things, the things they believe probably brought them a degree of success to date.
It therefore takes a slight leap of faith in order for them to shift paradigm, and especially to take the immediate, "massive action" required in their organisation, to gain momentum.Her commentary was, however, perhaps a little ungrateful, in that you had kindly given your time and knowledge over to this group.
The fact that she and some of her fellow audience that night, apparently failed to grasp the benefits of your methodology, was simply the age old problem of business leaders failing to take full responsibility, for themselves and others fate.
Although it's human nature to fail to listen/act until too late, it must be like being buried alive.
Incidentally, I think RC's and TW's posts to Blue Door made her reflect a little. This can only mean good, as the posts removal has shown...
Ironically I ran a conference last week up in Crewe and in the next conference hall was a two/three-day conference for Bentley cars - they didn't look too bothered!
In conversation in the bar, the guys I spoke to 'claimed' that sales were as stong as ever although the pipeline might be a bit weaker. They agreed 100% with the "Do Mercedes dealers worry..." sentiment.
Robert
I am opening a new business within the next 3 weeks, selling childrenswear and school uniforms. A gap created in the local market by the demise of Woolworth and another local indi retailer. I interviewed an ex-Woolies employee, who had been recommended to me, and after chatting with her long enough to realise that she was totally institutionalised (no job offer, I am afraid) she then demended to know of me, whether or not I intended to be 'competitive' in my pricing. I explained that there was no high street competitor, and the only seasonal ones (Tesco and Peacock) who are out of town, will not be an issue...that I will charge what I need to charge, to offer the service 52 weeks a year, and give a 10% 'cashback' to the local schools for doing all my marketing for me. Competitive with Woolies???? After all, I am still here, and have never been price concious. Our flexible and customer driven service is the 'added value' that our customers are happy to pay for.
Free!!??
http://www.inc.com/magazine/20101101/go-ahead-raise-your-businesss-prices.html
Having read the post, it was clear that the "Blue Door" author in question had not taken a little time to think about what you were saying at the event.
Although you break it down into succinct and highly usable tools, most business minds are focused on the wrong things, the things they believe probably brought them a degree of success to date.
It therefore takes a slight leap of faith in order for them to shift paradigm, and especially to take the immediate, "massive action" required in their organisation, to gain momentum.Her commentary was, however, perhaps a little ungrateful, in that you had kindly given your time and knowledge over to this group.
The fact that she and some of her fellow audience that night, apparently failed to grasp the benefits of your methodology, was simply the age old problem of business leaders failing to take full responsibility, for themselves and others fate.
Although it's human nature to fail to listen/act until too late, it must be like being buried alive.
Incidentally, I think RC's and TW's posts to Blue Door made her reflect a little. This can only mean good, as the posts removal has shown...
Ironically I ran a conference last week up in Crewe and in the next conference hall was a two/three-day conference for Bentley cars - they didn't look too bothered!
In conversation in the bar, the guys I spoke to 'claimed' that sales were as stong as ever although the pipeline might be a bit weaker. They agreed 100% with the "Do Mercedes dealers worry..." sentiment.
Robert
Blog entry on me performing at Suurry Chamber and telling people to put prices up:
"mutterings went round the room on this one….. not sure how convinced everyone was…."
http://thebluedoor.com/pr_blog.shtml
loving following these.
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