'FULL
VALUE PRICING'
IS HERE TO TRY.
In the accompanying article, the
issue of price as a key factor in making a profitable sale, is
canvassed. Pricing, often considered to be simple, is seen to be quite
a bit more complicated than most people think. 'Full Value Pricing"
makes competitive profitable pricing easy!
If you would like to take a look at an extremely easy, yet powerful
approach to pricing, go to the tutorial page provided on The Red Zebra
website.
This tutorial will not be taken down before November 9 2007.
Visit
myredzebra.com Now!!
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PRICING. IT'S
YOUR MOST POWERFUL BUSINESS DEVELOPMENT TOOL
Over
recent months, Management Memos themes have been focussed on
developing better sales results. Pricing is a key factor in getting
profitable sales growth. This month we take a tutorial, to help
you make the most of this vital business element. At the end, we give
you a chance to try the most amazing pricing tool you will ever see!
The Price Equation is Simple. Isn't it?
There is really no mystery in setting a
price. After all, there is the cost, then there's the profit,
and when
you put them together, you get the price. Simple!
If only it were that simple! First
of all, there is no simple
answer to the question "How much has it cost?"
No mistaking the 'profit' from the sale,
though. That's
the bit in between 'cost' (whatever that is), and what you get. But,
how
much does that work out to be - really? And it is enough?
Then how do you deal with labour? The
hourly rate is just as complex as the cost of goods. No, the Price
Equation is nowhere near as simple as it seems!
How Much Has it Cost?
When
you buy something to resell, you know
how much you
had to pay for it. However, that is not the whole cost. Just think if
how much
time it takes to buy some of those items where there's only a small
quantity, and a bewildering variety of alternatives - for instance,
spare parts. Compare
that with buying bulk products with a very simple specification.
It's common in small business not to recognise how much more it costs
to buy the spare parts, compared to buying
bulk items.
So everything you buy has
cost how much you had to pay directly - PLUS a varying amount of
other costs that include time to unpack and rack, time to take the
goods into stock, and all sorts of other things.
How do You Deal With Labour?
If you are adding labour to what you sell,
the labour has cost
what you have paid the workers
who supplied the labour, and some on-costs. But is that
all? Definitely not!!
Suppose you were running a muffler
shop.First thing on Monday morning, while there are no customers, you
have your staff make up some standard bends - the ones you will use
when the rush begins. That will save heaps of time!
What is the labour cost of those standard
bends you just had made? Is it the $80 per hour for which you charge
out the labour? Is it the $22 per hour you are actually paying the
people? Or is it free, because otherwise the staff would be standing
around doing nothing?
As you can see, the cost of labour is not
a simple question!
No mistaking the 'profit' from the sale?
'Profit' is
the bit in between 'cost' and what you get. Well,
that's 'gross profit', but since we can't be sure about the
cost we can't be sure about the profit - even if we have made a sale
and so we know
what we got for it.
Don't give up!There are lots of techniques
available to help you make more sales, and be sure you make more out of
each of those sales.
Customer Value!
Everything so far has been about your
costs and profit.
The one element missing is 'customer value'. As the sales
trainers tell you, the buyer needs to know that the value they will get
from buying, will justify them handing over their 'big stack of
money' to get it.
Get the price/value equation wrong - and
there is NO SALE!
How do you establish what the value is for
the customer, and what price will get you the business and maximize
your profit? In this issue, we are considering pricing, and the answer
to that question is a question about selling technique. It has been
answered in previous issues. Sufficient to say
here that there is no such thing as 'the price'. There is only the best
price for this particular sale at this particular moment to this
particular customer.
The Red Zebra pricing
method is
called the 'Full Value Pricing', because it allows you to
make judgements at the point of sale, on whether there can be a
marriage of values that satisfy the buyer, and gross profit that
satisfies you. Go to the left side panel to try the examples!
If
you'd like to find out more, talk
to us, or ask us a question here! Remember, there's no charge
or obligation, and you get a whole hour's consultation free. This
same offer also applies in New Zealand.
