There are many way to increase prices and profits – and some techniques involve charging less, not more!
At a webinar on pricing for creative enterprises in Bosnia and Herzegovina, I was asked how an enterprise selling services can increase prices. My answer was to say that we can put together different ‘bundles’ or ‘packages’ of services, to suit different price levels and customer budgets. If we are smart, we can actually make more profit in the process.
In a supermarket, manufacturers increase the price of goods (let’s say breakfast cereals) in two ways. The first way is to simply increase the price of a standard sized box of cereal. The second way is to reduce the size of the box and sell it for the same price. Per gram, that’s a price increase! But the consumer doesn’t notice, or doesn’t feel that they are paying more. In fact they keep changing the sizes of boxes, and the prices, so it’s hard to keep track of the price increases that are happening.
We can do the same. Let’s say we are selling just one service offering, such as a training package, or marketing service, or video production, or websites. If we continue to sell just one standard package of service, and need to increase the price, it’s going to be very noticeable by the customer, who might complain, or even go elsewhere. Instead, we can use what I now call the “cereal box technique”. We can say to the customer that as from next month, we are no longer offering just one service but two, and they can choose.
Service package 1 is a reduced service, but costs less, so they can pay less if they want, saving money;
or
Service package 2 is an enhanced service, with more value bundled into the package, but of course it will cost more.
So we give the customer a choice of paying more – or paying less.
Each package is priced to increase profit by carefully calculating the costs of each service offering in relation to the new prices.
Just as the cost of breakfast cereal per gram increases in both the smaller box and the larger box, we are making increasing prices per service element in both service packages.
We can be creative not only in the studio but also in the business office.
And that’s a creative way to reduce the price AND increase the profit!
Key Points
If we continue to sell just one standard package of goods or services, and need to increase the price, it’s going to be very noticeable by the customer, who might complain, or even go elsewhere. Instead, we can say that we are no longer offering just one package but two, and they can choose.
What to do next
• Consider splitting your products or services into different packages, with different price points, but still profitable.