A general comment on the subject of why profit should always be beneficial for both you and your customers.3 min read
There’s a general, regular discussion around pricing our services or products; how much profit we need to make to survive.
My stance on this is that price should always equal profit for both you and your customers. And here’s why.
As a business, you need to make a profit – you’d be surprised at how many firms don’t actually realise this.
When you make a profit, you can pay your taxes, your VAT, your wages, your rent, buy new equipment, invest in your staff … etc, the list is endless.
When you don’t you can’t do any of this stuff and when something like a pandemic hits (yeah, like that ever happens!) you can find yourself having to shut shop while the bailiffs and creditors are banging on your door.
But, profit shouldn’t only be a one way street for your business.
It should also be a factor for your customers.
Traditionally profit is defined as:
“a financial gain – the difference between the amount earned and the amount spent in buying, operating, or producing something.”
It can also be defined as:
“an advantage or benefit”
And this is where your customers come in.
You see, if there’s no value, no need, no profit in someone buying your product or service, they’ll not buy – it’s as simple as that.
The profit for your customer might be convenience, it might mean they get to save time, or can do something easier, it might just mean they know you provide a more personal service or simply gives them a better outlook in life.
For the customer, profit is the purpose.
You sell widgets, but there’s also some other guy selling the same widgets, and now you’ve got competition.
The easiest way to beat the competition is to lower your prices, but, of course, while that means more profit for your customer, it also means less profit for you.
So, you lower your price, then your competitor does the same, so you go lower, and your competitor goes lower, … and your profits follow suit.
Never participate in a price war.
Repeat after me:
“I will never participate in a price war.
I will never participate in a price war.
I will never participate in a price war.”
Instead, give your customer a reason to always think of buying from you when they need your products or service – the trust, the quality, even your back-story or your company philosophy might resonate with them and so you can price accordingly.
So, how do you build up this ‘raison d’etre’?
Be open – speak with your customers on a regular basis. And I don’t mean just getting them to sign up to your newsletter which is sent daily with nothing but sales pitches, I mean catch-up with them, call them on the phone, a simple email or spend time chatting with them if you’re meeting person to person.
Be transparent – If a delivery is going to be delayed, let them know. If that product is out of stock, let them know.
Be aware – You sold a widget, but, there’s a newer widget coming out next month. Great, let your customer know and also ask if there’s anything else they need help with.
Also, never be afraid of increasing your price.
Yes, you might lose a few customers, but you’ll not lose your business if done legitimately.
Remember – When pricing your products or service, it needs to profit both your company and consumer.
If you have any thoughts or comments on this subject or any of our other articles, please do let us know.