How to Increase Profits Without Raising Prices
When you think about profits, it's natural to assume that your focus should be on your price. But many factors drive your company's cash flow and profits, not just the list price of your products. Here are some ways to boost profits without raising prices:
- Check to see how quickly you're making collections. Cutting that time may make up the needed profits without any price increase.
- Look at all the discounts and allowances you offer. These factors affect your revenues and profits, so you need to review them before assuming that price is the culprit. Are customers taking advantage of quantity discounts to stock up inexpensively and then not buying between the discount periods? If so, you have a problem with your sales promotions, not your list prices.
- Examine how you assess fees. Perhaps your company is failing to collect the appropriate fees in some cases. (This one is particularly important if you're in a service business that charges a base price plus fees for special services and extras.)
- Determine whether your fee structure is out of date. If it is, your cost structure likely isn't reflected accurately. For example, a bank that charges a low price for standard checking accounts, plus a per-check processing fee, may well find its profits slumping as customers switch to automated checking over the bank's computers. Why? Because banks often set the introductory fees for this service low or waive them to stimulate trials. If so, the problem isn't with the base price of a checking account; it's with the nature of the fee structure.
