Self-Devpt. Nuggets™

No you don’t. And I explain why in this article, which was originally published – on Monday 6th December 2010 – as an issue of my static html based Self-Development Digest Newsletter here.

Myth: To Make Good Profits, Your Product Or Service Price/Fee Must Be High.

Fact: The above statement is NOT true.

It is important to avoid falling into the trap of thinking you need to charge a lot to make a lot of profits.

Companies like Richard Branson’s Virgin, have shown again and again, that substantial profits can be made from sales of affordably priced products and services.

The logic that makes this possible is simple. Just follow the tips outlined below, and you’ll soon be reaping VERY decent profits, while offering prices/fees LOWER than your rivals can afford to!

1. Aim to maintain low operational overheads: 

How much does it cost to deliver your product or service to customers? Are you certain that you have captured all contributors to the cost of your operation? If YES, then whatever figure you end up with will be what you will mark up by some profit margin to arrive at your selling price.

Now, if others offer higher prices compared to yours, it would NOT mean they make more profits than you do.

This is because they are likely to have a different operating cost profile compared to yours. If you can get access to such details, you could compare to ascertain for sure what the case is.

However, a more practical option would be for you to ensure your costing has been done right. Then explore possible avenues to LOWER your operating costs over time.

This way, without increasing your prices further, you would increase your profit margins, and still delight your customers by offering stable, friendly pricing.

2. Work hard to build high volume, sustainable, long term patronage:

Many times, businesses do not do as much marketing as they should.

As a result the incoming volume of customer patronage tends not to be adequate or sustained.

This can force the company to employ give-away promos, or discount incentives to encourage more sales.

The reality is however that sales/marketing efforts can be intensified. This, combined with intelligent initiatives to generate valuable sales leads would make conversion rates up, resulting in increased sales.

Most importantly, effective after sales service and customer relations would attract repeat purchases and referrals (depending on the type of product or service).

3. Constantly employ creativity to re-invent your offering: 

Think up new and better products/services to delight your customers. Explore creative ways to serve them. This will make them happy to stay with you.

And those extras – some of which could be designed to come at no additional charge – would give them something to brag about to their friends, associates etc.

The latter could in turn indicate interest in what you offer over time. Even if they do not, at least your name/brand would be impressed on their consciousness. In future, this could work in your favour.

Think about it. What are the factors that determine your price?

One would be the prevailing prices in the market place.

But sometimes checks reveal others are exploiting customers via exorbitant pricing. You stand to gain by offering more reasonable prices.

Branson hinted at this when he said he looked for places where companies were “taking the Mickey out of the customer“.

This made him aim to enter such markets with value adding, affordably priced alternatives, to compete with such companies.

Going by how long he has remained in business in most markets he has entered; it is obvious that what he advocates actually works.

You can benefit by adopting a similar philosophy.

Final Words: To Make Profits As Explained Above, You Are to Be Affordable – NOT CHEAP!

I cannot end this without pointing out that my experiences in serving some narrow minded clients. You are likely to meet them too.

The kind who demand the lowest (or if possible NO) price, in exchange for your product or service. Most times, they simply want to exploit you.

I have had such prospects/clients say all sorts of (honestly silly) things to me, just to have their way:

a. They said: “We don’t have money. Don’t worry, do it free for us and God will bless you”.

I responded: “Sorry, but I cannot afford to do that. Indeed, every time you pay to have me do it, it is actually God who is blessing me!”

b. They said: “Why not sell to us at a loss, since you are just starting, so that we can recommend (the product/service) to others, who will then buy from you”.

I responded: “I have already done that in the past for others, and by so doing proved that the value I offer is worth paying for. If I had continued that way, I would not have stayed in business long enough for you to discover me.”

Resist the Temptation to Give In – You’ll Only Hurt Your Brand!

Napoleon Hill once wrote that human beings rarely appreciate – and often discredit – anything they get for free or without effort.

My experiences confirm this to be a very accurate statement.

I urge you to be guided by it, especially if you operate in a society like mine – otherwise you could end up being used and dumped!

Remember: You do not have to be expensive to be profitable. BUT offering your products/services CHEAPLY – or worse at NO cost – is not likely to win you healthy profits that can sustain your business for the long term either.

You have been warned!