When you sit down to go over your client’s financial results using Mentor Plus® $COPE IT!™ software, you start off with a few changes to their scorecard and then you move to their cash flow goals. You open up operating cash and double click to get to the targeting screen. That’s where the real magic happens. By walking through different planning scenarios, you have an opportunity to start asking questions and getting the owner’s input. Rather than filling in any numbers, ask the business owner which measures he believes he can change and then take his/her suggestions.
Start at the top of the strategies section with revenue growth in dollars or percentages. “How much growth do you think you can achieve?” Then move to price as a percentage. “What can we do here?” Most of the time, your client will tell you categorically that they cannot raise prices. He may say something like this, “Raise prices in a recession? Are you #&^%$ kidding me?” Resist the urge to: a.) run and b.) accept his response at face value. Instead, start asking questions and probing deeper into their business.
Your client might be able to effectively increase prices without changing a single individual item price. Ask him about promotions, bundled offers, the quoting process. Have him consider raising his overall price point by changing the sales mix, bundling items, or changing the size of products. We’ve all seen smaller containers of food items sell for more per ounce than their family-sized brethren on the same shelf. Raising prices doesn’t have to involve a direct price list adjustment to a single individual SKU.
Here are five options to consider for your clients who need to achieve an effective price increase:
1. Look at their channel mix. If they are selling to wholesale and retail channels, by increasing the ratio of retail to wholesale sales, they will effectively raise their prices.
2. Evaluate their product mix. If they have two products, a high- and a lower-priced item, have them concentrate on selling more of the high priced item. Incent their sales team with contests or rewards based on units of the item sold per day/week/or month.
3. Review their salesperson compensation. Have them consider compensating sales people on average sales per day rather than total dollars or unit sales.
4. Review their product packaging. If they are selling one or two sizes of a product, have them consider selling a smaller sized item at a premium per unit price.
5. Review fixed charges. If your client sells a service with a setup charge or fixed price element, consider raising the fixed charge by a small amount. Have them consider adding a fixed fee for shipping and handling to every order.
By helping your clients see new ways to improve their pricing strategies, you can have a huge impact on their business. You may also find that you have a similar impact on your own firm - by building stronger client relationships and having more satisfied, successful clients.
Figure 1 Mentor Plus $COPE It! software targeting screen