Making a Positive Influence On Profits - Selling Price Increases

We meet many clients who have become increasingly frustrated with reduced profit margins or eroded profitability. Simply put, there are only three ways to increase profits:-

  • Increase sales
  • Reduce costs
  • Increase prices

Let\'s focus on the latter. We live in a global economy where raw material/ component prices fluctuate significantly placing immense stress on suppliers and customers alike as these price changes move through the system. We see a lot of situations where a client is faced with a significant increase in base material costs and significant resistance from the 'front end' of the business in 'selling' these increases to customers.

Selling a price increase effectively requires considerable skill which if perfected can make a substantial and very positive difference to profitability. We highlight a few key factors below:-

  • Ensure that you have justification for your price increase and be able to prove it
  • Prepare the ground before the meeting – a letter or e mail 'setting the scene'
  • Understand the margins currently being made from the customer – prepare your case well
  • Anticipate the buyer's objections and have some answers
  • Set realistic objectives by customer –
    • Retain whatever
    • Allow some negotiating room
    • Full increase a must
  • Know when the price increase should start from and stick to it
  • Know your base position and next best alternative before you make the call

In all successful negotiations preparation is the key to success and most price increase 'pitches' founder not because they are not justifiable but rather that the case has not been prepared thoroughly enough. Successful price increase implementation is one of the most dynamic ways of improving your profit – a 5% price increase on a £5 million business adds £250,000 in annual profit that goes straight to the bottom line.

Take a little time to review your price challenges – you could be paying a heavy price for not being in a position to increase your prices.

To arrange for a no obligation discussion with one of our expert team please contact us.

David Turner

Managing Director

© Tinderbox Limited 2011

 Business Development

Improving Business Profit

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Who we have worked with: Hallmark Cards, Coca-Cola, Hasbro, Rolls Royce, Sunseeker, Mattel, MicroSoft, Argos, Auto Glym, P&G, Ferranti, FloGas, Lloyds TSB

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