The Smith Report - Operational Playbooks

Sales Price Increases (and decreases) – Issues To Consider

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Sales Price Increases (and decreases) – Issues To Consider

It’s probably not a topic that‘s had much airtime over the last few years but price increases need to be put on the agenda from time to time. I’ve listed below some items I’ve been discussing in management meetings to help.

Key Topics
  1.  Create a simple list of all products with columns for sales price, gross margin, competitor’s price for an equivalent product, unit sales for each of the last 3 years.
  2. Look for low gross margins and discuss if engineering can take costs out the system (manufacturing). Play with the sales prices needed to bring the GMs up to an acceptable standard.
  3. Look for correlation between high priced products and low volume. There may be arguments to lower prices in lucrative areas and make more money.
  4. Look for large discrepancies with competitors and examine why.
  5. Bring on the table the anecdotal evidence from your sales team. Winning or losing business because of price?
  6. Any observations from Customer Support or Installation Teams?
  7. Are one or more of your products unique, offering real rarity. Look at Hana a database tool from SAP; almost overnight they have created a $300m business. The fastest growing product in SAP’s history. Do you sell a remarkable product that could be premium priced?
  8. Remember expensive and cheap are relative terms. They are meaningless unless linked to ROIs. High priced products (relative to competitor’s prices) can generate a very attractive ROI in the eyes of your customer.
  9. Watch non-dollar price lists becoming out of date because of severe currency swings.
  10. If your web site doesn’t contain your sales prices – how will prospects know you’ve increased prices?

Just some thoughts to get you started. Pricing strategies are domain specific and require input from many sources to get them right. And of course it’s a continual process not an event.

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About the Author

Ian founded The Portfolio Partnership (TPP) in 2010. TPP is an operational consultancy focused on scaling private businesses safely. He believes his resume of building 4 previous businesses from publishing, investment banking to software in Europe and the States gives him a unique set of skills and a sense of humor. He remains a competitive masters track & field athlete and in 2012 was ranked #2 indoors in the world for his age at 400m.

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