My family and I just returned from Disney World. It was a great trip.
One thing is for certain, they know how to take your money…and have you leave happy about it.
Why is that a business like Disney can take your money in ridiculous amounts, and yet most business owners never want to raise their prices?
I learned some valuable lessons on my trip about pricing and I wanted to share them with you.
Pricing is one of the key factors in profitability, and yet many business owners do not have a system for increasing prices, are afraid increasing prices will make them lose customers, and haven’t increased prices in over 5 years.
So here are 3 ways to instantly increase profits
1. Systematically Raise Prices
I discuss this in my book as a part of the 2nd Gear – Conversion. One of the key metrics for conversion is average ticket price. What is the average price your customers pay? Has that average changed in the last year? 2 years? 5 years?
How about your average profit margin? Is it increasing? Decreasing? Staying the same?
Did you know that increasing your prices will directly affect your profit margin assuming most other costs stay the same? It flows diredtly to the bottom line
So what is your system for reviewing prices and raising prices?
For the past 10 years I have raised prices every quarter by 1-2%. Now during the recession I’ll admit I only raised them by 2% for the whole year…but I raised them. While all my competitors and even some fellow franchisees were lowering prices and doing whatever they could to beg, barter and steal for more business.
I highly suggest you look at how you can raise your prices today. You have far more elasticity in pricing than you think you do.
Set a time each quarter to evaluate pricing, and increase your prices
2. Create An Experience
While in Disney World my daughter was treated to a Royal Event. Her “Pop Pop” (my wife’s father) took her to a Royal Tea with her mom and grandma. It was a very special event.
At a ridiculously expensive price.
But it was an experience.
They took what could have been a nice tea with good food and even a character, and created the ultimate experience for the little princesses in attendance.
An 18” doll, a rose, a special birth certificate for the doll, special treats, a serenade by a special host, and time with Aurora the princess.
Yes it had a price tag that is very high, but the experience and memory made it worth the price.
So what in your business can be made more extraordinary?
How can you add some special attention to something and charge more?
Maybe you add delivery for free and add a special gift at delivery – a wow factor.
Perhaps you offer some type of VIP service and charge 20-30% more for those special privileges?
Only you can brainstorm what to do, but find a way to offer a premium and create an experience.
3. Throw A Price Out There Every Now And Then
Sometimes business owners get too scared to price something at a high price. I challenge you to throw a price out there and see what happens.
It doesn’t mean you can’t give some options, but give them two options and make one much higher. See what happens. You will probably be surprised.
It takes guts to push it across the table when you know it’s high, but you may close the deal. And statistics show as much as 20% of the time people take the higher option.
Disney just opened their Star Wars Launch Bay at Hollywood studios. Inside they have props from the movies and costumes. They of course dump you into a gift shop.
Inside you can purchase a life size storm trooper statue.
And they already sold 3 in less than 2 months.
Throw a price out there, if they can get $9k for a statue…I think you can get 20% more for a product or service if you are providing the right value.
So…how can you add profits this year?
Work on your pricing and don’t be afraid to raise it! Do ti now!
Jon “I’m raising your price for this free blog” Toy
P.S. – tell me why you think business owners don’t want to raise prices? I’m curious to know your thoughts