THE AMAZING POWER OF PRICE ELASTICITY
Profits need protection.
There is always a great deal of anxiety about prices.
“Should I raise my prices?”
“Are my prices too high?”
“What should I price my services at?”
Many businesses surrender to their own fears, pressures from competition, conversation with peers, and other influences and begin slashing prices, trumpeting discounts, and sacrificing their profits. They think desperate times call for desperate measures.
I am here to tell you: STOP. Just because you might feel like these are desperate times does not mean YOU must be a desperate discounter! THERE ARE BETTER WAYS. If you follow the advice, you CAN SAVE YOUR PROFITABILITY.
There is, as an example, a famous clothing store chain that has, in short time, gone from promoting “buy one, get a 2nd suit for 50% off” to “buy one, get a 2nd suit free” to “buy one, get a 2nd suit free AND a 3rd suit free.” Many try the same process with their service. Where will that end? Bankruptcy, that’s where.
This can help you STOP SUCH MISTAKES – or to rescue you and reverse such behavior if you’re already engaged in it.
SO, LET ME SHARE SOME AMAZING-BUT-TRUE STORIES:
- In a mostly blue-collar town, a young woman operates a gourmet pizzeria, selling pizzas at $22 to $38…and she doubled the size of her business.
- In a suburb of New Orleans, a martial arts school is surrounded by 7 competitors; his prices are more than double those of his closest competitors; in the midst of the 2010 recession and summer doldrums, his school had consecutive “best months ever.”
- In Iowa, a commercial real estate broker controls over 70% of all transactions in his market, never cuts commissions, and charges every buyer a fee just for access to his services.
- Starting in Cleveland, Ohio, a chiropractor took his three clinics and turned them into a national chain of over 280 clinics in just 36 months – and in virtually every market, his offices’ fees are higher than all other area chiropractors.
- In the financial services field, an advisor has tripled attendance at his seminars (while most other advisors are suffering low attendance), has imposed a new fee for follow-up appointments (rather than doing them for free and begging people to take them), and increased his personal income by over $400,000 this year.
What all these Amazing Stories have in common is:
THEY’RE NOT AMAZING AT ALL, IF YOU KNOW HOW TO ADVERTISE AND MARKET EFFECTIVELY TO ATTRACT CUSTOMERS, CLIENTS, OR PATIENTS FOR WHOM LOW, LOWER, AND LOWEST PRICE IS NOT A CHIEF MOTIVATOR OR CONCERN, AND TO POSITION AND PRESENT WHATEVER YOU SELL OR DO IN A WAY THAT NATURALLY MAKES IT’S PRICE ELASTIC.
But do you instantly want to tell me that all customers or clients available to you buy based on low price…demand lowest prices…are cheapskates…and that the way you must cope is to slash prices and sacrifice profits just to stay afloat? If you weren’t thinking that, congratulations. But most businesspeople think this way. And, man, are they wrong-headed! Ironclad, extensive research shows that even in recession, fewer than 20% of customers in any product/service category make their buying decisions with price as determining factor – except when nobody offers any other criteria for their decisions, 80% of the buyers available to you are NOT “price buyers,” unless you let them be, by your own false beliefs, poor marketing and salesmanship, and foolish surrender!
You CAN sell successfully at prices substantially higher than your competition or that you imagine possible, if you know how. Yes, YOU. Yes, NOW.
People using this system…our Members…are very often very skeptical and doubtful but then pleasantly surprised at how much “price elasticity” exists in their business.
What is “price elasticity?” It is YOUR opportunities, probably missed by you now, to charge higher prices and boost profits, to sell at prices higher than your direct competitors, to attract clientele for whom many factors matter more than price. It’s rarely as simple as just raising prices. That may get you slaughtered. There are many creative, clever strategies for increasing the average transaction size, the initial new customer value, and the reoccurring customer value and for inching up price and offering tiered price-value options…so that you make more money per customer or client. And listen carefully to this: at a time when each customer may be harder to come by, it is all the more important to achieve the maximum possible income from them.
Under pressure, most noncreative businesspeople follow the crowd and cut, cut, cut prices, winding up working more for less, and even dangerously weakening quality of service or starving their advertising and marketing as profits evaporate. THIS IS VERY BAD MEDICINE. A PRESCRIPTION FOR DISASTER!
We will take you to the road less traveled, much less crowded, and much, much profitable.
With this issue of the Financial Forensic Report we are starting a new column “Marketing Your Services for Greater Profits.” We will offer our suggestions, recommendations, and experience, as well as that from others, for your consideration. The above was sourced from Dan Kennedy “NOB.S.Special Report: the Secrets of Our Most Successful Members.” We welcome your comments, suggestions, and success stories for consideration for future publication. All contributions are subject to editing. By making a contribution, you are granting Financial Forensic Services the right and authority to publicize your contributions.
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“Let the wise listen and add to their learning.”
Pr 1:5 NIV
As you examine your mistakes, you realize it was your thinking at the time that caused them, and that’s why you need to keep challenging your own thinking. “Let the wise listen and add to their learning.” How do you do that? By learning to appreciate how others think and by continually exposing yourself to people who are different from you. You will think like the people you spend the most time with. When you spend time with people who think outside of the box, you’re more likely to break new ground. Let’s face it, any time we find a way of thinking that works, our greatest temptation is to rely on it repeatedly – even if it doesn’t work in new situations.
When your goal is to protect the success you already enjoy, you put the brakes on the process that can lead you to even greater success. Holding on to a good tradition is a good thing. But you need to remember that every tradition was originally a good idea, perhaps even a revolutionary idea, but every tradition may not be a good idea for the future. When you cling to what’s already in place, you resist change – even change for the better. That’s why it’s important to challenge your own thinking. If you’re too attached to how things are done now, nothing will change for the better.
John Maxwell writes: “In your early years you won’t be as wrong as people think you are. In your later years you won’t be as right as people think you are. And all through the years you will be better than you thought you could be.”
Think outside of the box.
Excerpt from “The Word For You Today,” 2019
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