Do you want to amp your business’s bottom line? What are the different ways to improve profitability without raising prices?
Raising your prices in an effort to increase profits is a dangerous move that has a high chance of backfiring. Unless your business provides a product/service of exceptional value, you risk losing a significant proportion of your customer base to competitors. Before you raise prices, you may want to consider other ways of improving your business’s bottom line.
Here’s how to increase profits without raising your prices.
3 Ways to Increase Revenue Without Raising Prices
Since businesses rely on profits from their sales to continue running, they often raise prices in an attempt to quickly generate more revenue. However, this isn’t the only way to increase your profits. In his book The Personal MBA, Kaufman explains how to increase profits and sales revenue without increasing prices:
1) Complete single transactions with more customers: This involves attracting and converting more potential customers into paying customers for a single product or service.
(Shortform note: The most effective way to complete more single transactions is to expand your marketing, sales, and distribution network. This increases your online presence and allows you to cover more geographical locations—thus attracting a wider range of customers. Since many businesses don’t have the resources to expand their network, they often partner with external marketing agencies, vendors, and distributors to manage customer relationships on their behalf.)
2) Increase the size of each transaction: This involves convincing customers to pay more by purchasing additional products and services. For example, customers buy a mobile phone (the main product) and accessories, such as headphones and a case (the additional products).
(Shortform note: Sales experts suggest that you can increase transaction amounts by bundling products and services and marketing them as a set. For example, presenting the phone, the accessories, and the line rental subscription as a package deal. Alternatively, you could present your products and services separately and offer a discount to customers who choose to make multiple purchases at one time.)
3) Sell more often to existing customers: This involves encouraging customers to increase the frequency of their transactions. For example, customers who buy printer ink once a month generate more long-term profit than those who buy the same product once every six weeks.
(Shortform note: Customer retention experts suggest an effective way to encourage more frequent transactions: Send reminders based on past purchases. This involves tracking your customers’ previous purchases and sending reminders to restock. For example, the printer ink business reminds customers to purchase ink four weeks after their last order.)
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Here's what you'll find in our full The Personal MBA summary :
- A comprehensive overview of how businesses work
- The five key processes that underpin every business
- How to identify profitable opportunities to ensure business success