Price optimization should be one of your top reoccurring focuses as a CEO.
If you increase your prices only one of three things will happen …
1) Sales will go down. (Maybe not so good.)
2) Sales will stay the same. (That’s cool.)
3) Sales will go up. (Really? Yes really.)
The reason people shy away from increasing prices is because they fear that it will have a negative impact on sales volume.
And the fact is, it could.
But as they say …
Revenue is vanity, profit is sanity.
As a CFO, I can tell you that it can still work out okay – even be beneficial – to accept a decline in sales because of an increase in prices IF the move is part of a strategic plan.
Of course, if sales stay the same, you’re in the money – that new cash will drop straight through to the bottom line and make a big impact on profit.
Most interesting though is the fact that increasing sales CAN actually increase sales.
Through price optimization, you consider all aspects of customers’ behavior and buying rationale to discover when and why people will be prepared to pay more money for the same product or service.
Then you start to incrementally increase prices until you hit the ‘TTT Price’ … otherwise known as the ‘They Think Twice Price’.
Once you see people ‘thinking twice’ wind your prices back a touch and you’ve found your optimized price.