How to Increase Yields Not Prices

Posted by IanDSmith under Sales
From http://www.portfoliopartnership.com 3926 days ago
Made Hot by: NolanGreen on August 3, 2013 5:48 am

It’s a tough market to raise your prices. Customers are extremely cost conscious and market savvy. Why should they pay more? Instead you need to reframe the problem into a yield optimization problem.

Who Voted for this Story

Top BizSugar Users

This week's most active BizSugar users. Join Them!

Comments

Written by IanDSmith
3918 days ago

Martin, the bigger picture on currency hedging, the value of the dollar, yen, euro was outside the scope of this blog post. However related to currency and price rises I would add that the impact of a potential sales price is often different in different markets. Overall I was pointing out that there are many alternatives to increase yields other than price increases.

- 0 +

Written by lyceum
3918 days ago

Heather:

I understand that notion due to the fact that I have worked as a purchaser for a long time. When the sales people / marketing departments from the vendors came with a price increase due to raw material prices, inflation, currency changes, etc., I asked about substitutes, change of formula, different order quantities, safety stock with decreased delivery time, etc.

The deeper question I asked was about what could you do with the payment you get. I think we could see an increase interest in bartering and currencies backed by an objective standard.

Ian: I must comment on your statement: " Increasing sales prices is tempting because it goes straight to the bottom line." My saying is that decreasing the purchasing price is going straight to the bottom line. One saved $1 is more worth than a sales $1.

- 0 +

Written by IanDSmith
3918 days ago

Martin so how would you suggest an entrepreneur in your mind stops the decline in the purchasing power of the dollar or save his dollars.

- 0 +

Written by lyceum
3918 days ago

Ian & Heather: Interesting thread on the relation between value and price. My question is: How do you get paid at the end. What do you do with the fiat paper currency you get when you look at the decreased purchase power of the dollar. I have made a philosophical point in the section, WorkShop, on my business site:

"I am open to discuss different terms of exchange of values, i.e., delivery of service and payment. As a supporter of objective money, i.e., precious metals, my standard price is 1 kg / ~35.27 oz of silver (Ag) according to the buy rates at GoldMoney for a 1/2 working day (circa 4 hours, effective time)."

I will add another terms of payment: X American Silver Eagle (1 troy ounce) $1 coins according to the spot price.

- 0 +

Written by HeatherStone
3918 days ago

Hi Martin,

In this case, what we're really talking about is making changes to a product or service without simply raising the price. The idea is that simply raising the price for the same product or service is always difficult, because customers feels they should be getting more value for more money. Instead, reinvent the product or service. Find a way to make it worth more in the customer's eyes. (Or find a way to create and sell it for less.)

- 0 +

Written by IanDSmith
3926 days ago

Thanks Heather. It seems these days people want more value for less! It's clear that the only way to think about your customer is the value, the outcomes you deliver. Forget features and benefits. You need to think about specific outcomes for each specific customer.

- 0 +

Written by HeatherStone
3926 days ago

Hi Ian,

Customers must see the value. It's that simple. Increasing the value is harder then simply raising the price, of course. But it's what your customers will respond to best.

- 0 +