Sadly, the costs of living and running a business are always going to rise. The consistent challenge for any business is how to reflect this in the prices charged to protect one’s profit margins. No customer welcomes news about price increases, and the truth be told, no photographer likes sharing this news either. Large businesses are renowned for regular reviews of their group assets and assessing where they should be trimming their fat. It can also be done in a less personable way. The results are obviously wide-ranging on a smaller level for employees but necessary, nonetheless. It is no different for small business.
No customer welcomes news about price increases, and the truth be told, no photographer likes sharing this news either.
In fact, for small businesses, these reviews happen almost subconsciously on a daily basis as it is a less complicated structure than the one big businesses face. However, it is done in a more personable environment. Reviewing the cost of your paper supplier. The cost of travel into your office. The levels of ink in your printers. All these things have an incremental effect on the business overheads, and therefore your profit margins. So how do you handle this?
- Benchmarking against others and yourself. Knowing what each of your products is costing against those of your competition becomes an instinctive action the longer you are in business. The more intimate you are with this comparison, the easier it becomes to make small adjustments almost imperceptibly. It is also important to look at how your products have fared month-on-month and year-on-year. This comparison gives you a strategic look at whether you should be continuing a product line or not.
- How are your top performers? The products that give the business your highest margin is often the most likely place to incrementally increase that margin. The promotional focus on these is more likely to give you more ROI so consider expanding that area if possible. Reduce the low-margin areas or the areas where more time is spent for less reward.
- Low margin, more volume. Have you got more room for the low margin areas in your promotional space online or floor space? If so, more volume can sometimes make it worthwhile. If it saves on supply chain and admin costs.
- Communication. Sudden or even incremental increases in product cost to the consumer are not unexpected. Acceptance is another thing, but a little bit of sugar helps the medicine go down as they say. Make sure there are solid and transparent reasons for doing so and that this information in some form reaches the consumer. If the explanations are understandable and backed up, aside from a few exceptions, there should be no comeback as most people are reasonable.
- Sell across the range. If consumers are buying one entry level product at the cheaper end, use that entry point to introduce them to another more expensive range to add to the collection. This can in the form of a one-time discount or future incentive through a membership scheme. They are sold on your company, so find ways to keep them involved.
We keep coming back to the community and there’s a reason for this. If a company can establish an emotional connection with the consumer group, this is a very strong halfway house to consistent sales with the group. Through quality branding and a personal touch, the relationship will grow and develop into a two-way street that others will notice. Accepted price rises and increased volume of sales will follow.