I’m grateful to Robert Craven of The Directors Centre and Dale Carnegie for the inspiration for this blog.
One question I am regularly asked when I’m speaking at events or running credit control workshops is “How can I increase my profit margin without upsetting my customers?”
At the moment it is probably easier to raise prices and justify it than it has been in the past. You only have to look at the price of petrol or shopping to realise that prices do go up but it doesn’t necessarily stop you buying petrol or food. The art of raising prices is fairly easy but needs to be managed.
The first thing you need to do is review your client base and see which of your customers pay on or before settlement date (80% on average) and those who do not.
Those customers who pay on or before the due date, phone them. Ask if they have a few minutes to spare as you would like their feedback on your products and services. You should conduct the conversation as if it were market research and your first question should be about improvements to your product and service they would like to see. You’ll be amazed how when asked, everybody has some criticism they would like to impart, no matter how satisfied they appear to be. If they make a suggestion that you feel could help your company, thank them and explain why. If on the other hand they make a suggestion that you beleive is wrong or unworkable don’t argue but thank them and say that you’ll look in to the possibility of implementing their suggestion. Either way your customer will be delighted to find that you consider them worthy of being asked for advice. You on the other hand have obtained some valuable insight and now know where your product and or services can be improved.
You should then mention that “unfortunately due to the fact that your manufacturing, or printing or petrol etc have gone up you are left with no alternative but to raise your prices by say 10% on a specified date”. However, because you value their custom and assistance you will be holding their price rise to say 5%. However, if they could improve their settlement terms to 7 days from the date of invoice, the price rise will be 2.5%.
To the late paying “customers” send them a letter explaining that due to circumstances beyond your control, as of say 1st May your prices will be going up by 10%. The majority will not question the rise, but some will and will call to question the rise. When this happens you have a golden opportunity to insure that you’re “customer” sticks to your credit terms by giving them an incentive. Tell them that if they can settle your invoices within 30 days the prices will only go up by say 7.5% but if they can settle within 14 days the price will only go up by 5%.
You may find one other advantage of a price rise in that you could loose the bottom performing clients will move to a fresh supplier. Remember by raising your prices you won’t have to work as hard to maintain your current turnover.
If you would like to know more about David please do not hesitate to ask or visit www.deanemcollections.co.uk
One question I am regularly asked when I’m speaking at events or running credit control workshops is “How can I increase my profit margin without upsetting my customers?”
At the moment it is probably easier to raise prices and justify it than it has been in the past. You only have to look at the price of petrol or shopping to realise that prices do go up but it doesn’t necessarily stop you buying petrol or food. The art of raising prices is fairly easy but needs to be managed.
The first thing you need to do is review your client base and see which of your customers pay on or before settlement date (80% on average) and those who do not.
Those customers who pay on or before the due date, phone them. Ask if they have a few minutes to spare as you would like their feedback on your products and services. You should conduct the conversation as if it were market research and your first question should be about improvements to your product and service they would like to see. You’ll be amazed how when asked, everybody has some criticism they would like to impart, no matter how satisfied they appear to be. If they make a suggestion that you feel could help your company, thank them and explain why. If on the other hand they make a suggestion that you beleive is wrong or unworkable don’t argue but thank them and say that you’ll look in to the possibility of implementing their suggestion. Either way your customer will be delighted to find that you consider them worthy of being asked for advice. You on the other hand have obtained some valuable insight and now know where your product and or services can be improved.
You should then mention that “unfortunately due to the fact that your manufacturing, or printing or petrol etc have gone up you are left with no alternative but to raise your prices by say 10% on a specified date”. However, because you value their custom and assistance you will be holding their price rise to say 5%. However, if they could improve their settlement terms to 7 days from the date of invoice, the price rise will be 2.5%.
To the late paying “customers” send them a letter explaining that due to circumstances beyond your control, as of say 1st May your prices will be going up by 10%. The majority will not question the rise, but some will and will call to question the rise. When this happens you have a golden opportunity to insure that you’re “customer” sticks to your credit terms by giving them an incentive. Tell them that if they can settle your invoices within 30 days the prices will only go up by say 7.5% but if they can settle within 14 days the price will only go up by 5%.
You may find one other advantage of a price rise in that you could loose the bottom performing clients will move to a fresh supplier. Remember by raising your prices you won’t have to work as hard to maintain your current turnover.
If you would like to know more about David please do not hesitate to ask or visit www.deanemcollections.co.uk
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