Greetings Floor Dealers!
I know, I know…I can almost hear the howls of protest. “But Jim, we’re in a recession! How can I raise my prices?” Easy. Just do it.
It always cracks me up when I hear someone say, “Oh, my competitors are cutting my prices.” My immediate question is, “How? Are they sneaking into your store at night and switching all the price tags?” I’ll PROVE that your competitors are not cutting your prices. Go call five of your competitors and ask them if they mind if you raise your prices and see what they say.
Your competitors DO NOT determine your prices, you do. If you are not able to get a high price and a high margin for your products, then you need to stop blaming your competitors and do a better job building value into your products and services. Using the Design Audit, and using testimonials are great places to begin doing that.
Larry Steinmetz is the author of How To Sell At Prices Higher Than Your Competitors, and I interviewed him for one of our coaching calls. He says that one of three things will happen if your raise your prices:
1. Sales will go down
2. Sales will stay the same
3. Sales will go up
Let’s look at each one of these.
Sales go down
Larry says in his book that, for most businesses, if they raise their price by 10% they can afford to lose 40% of their clients and still make the same net profit. Now this varies a bit from business to business, and I recommend you read Larry’s book so you can see his full thought process on this, but you can afford to lose a surprisingly large percentage of your clients and still make the same amount of money if you raise your prices by 10%.
Here’s the important thing to consider: RARELY will you lose clients by raising your prices. The caveat for is that if your customer service is piss-poor and you have no “Wow” factors built into your sales process, so that the only way you can attract clients is by “cheapest price” advertising then, yes…you’ll lose clients if you raise your prices.
Sales stay the same
This is a much more likely scenario. In the January issue of IBIL we included a short profile of brand new Platinum member, Patrick McDonald. Here is a quick recap:
During our first one-on-one coaching call, Patrick told me that while he was still a Gold Level member he raised his prices. When I asked him what prompted it, he said that after listening to the coaching materials he finally got fed up with letting his competitors dictate his price. So on his next 6-7 quotes he raised his gross margin by 5% and closed all but one sale. He estimates that this netted him an additional $4,000+ that he would have left on the table. Patrick employed the number 1 strategy for charging higher prices, which is this: “Raise your prices!” Most floor dealers severely underestimate what their clients are willing to pay.
Patrick did 6-7 quotes and closed all but one of them after he raised his prices. It’s highly likely that the outcome would have been the same even if he had used his lower price.
The reality is that if you raise your prices you will be stunned at how little difference (if any) it makes in your closed-sale ratio, and how your clients rarely even seem to notice. Price is mostly a neurotic preoccupation with the business owner. It’s far more present in the mind of the owner than it is in the mind of the client.
Sales will go up
Platinum member, Mark Bouquet experienced this first hand when he joined the club. Here’s what he had to say:
Hey Jim,
Where do I begin! I apologize, but results have been so good that I have no choice but to ramble…
Attitude! Attitude! Attitude! Since joining your club I’ve completely changed my paradigms on pricing. I’m a brand new member, but because of your coaching on price, I raised my bid on a commercial job by $11,000…and got it! The best part is this is phase one of a 5-phase project, so I’ll make an extra $55,000 in pure profit!
I’m raising all my prices in spite of a slow economy. Man, I had one of those customers, nice lady, sitting on the fence for nearly a year! I sent her your Connect Letter and—thank you very much—a $6,000 job in the win column! (As in win/win.)
I am booked 3 weeks out, hired a part-time crew (soon to be full time) just to cover the additional work.
I have guys doing the shoe-cover strategy, the referral program is in place, the Connect Campaign, testimonials that I got sporadically but now coming regularly.
All this while just scratching the surface of your systems. With our warehouse move, showroom remodel, and life issues, it’s been more difficult to implement like I want to. I cannot wait to see what happens when I fully implement. Shock and awe next! Then the Home Advisor, then…something every day no matter how small it seems!
Jim, thanks for giving me the spark, programs and coaching to have a way to get the “Ideal Lifestyle” that I thought I could and would have when I opened in 1990. It sure is going to be cool to have time AND money. Not one or the other.
God Bless You!
Mark B.
If Mark had not raised his prices he would have left $55k on the table. But he raised his prices and sales WENT UP! This was written in the Fall of 2008, and by June of 2009, he was adding still more crews to keep up with all the extra work!
The second paragraph of Mark’s letter contains the key to charging higher prices. No magic. No high-tech formulas. Go back and re-read it. Then tape the first three words of that paragraph to the wall next to your desk as a reminder of what it really takes to raise your prices.
To Tons Of Customers!
Jim Augustus Armstrong is The “Coach”
Jim Augustus Armstrong is the President of Flooring Success Systems, a program that equips dealers to double their profits, cut their work hours in half and beat the boxes! Many dealers have totally transformed their businesses and their lives for the better after joining Flooring Success Systems.
See what real, live dealers are saying!