How much are Your Sales costing You?
When businesses look at their different products and services, they usually have pricing strategy. For products they may, for example, double the wholesale price to cover their overheads and deliver some net profit. For services, they may look at how long the component tasks take, the cost of the employees delivering the tasks, and again add a factor for overhead to determine their prices.
What few do is consider the cost of a sale. Now some sales are transactional, for example when you order a cup of coffee at a café. The barista isn’t spending a substantial part of her time convincing the customer to buy the coffee as the customer has already made a buying decision when he walks in to the café.
If, however, a person works at a car dealership, all their time is spent making the sale, and quite often there is no sale. In other businesses, employees spend time on both selling and delivering. These costs need to be considered when pricing products.
This can have a significant impact, especially on lower price items. Quite often businesses find the sales process is very similar for a low price service as for a higher priced one with more margin. Unless the sales process for the low priced service can be streamlined, or the service marketed differently to reduce the cost of a sale, this needs to be factored into the pricing.
While it may be argued that this might reduce the number of the lower priced services sold, you will be making more on each sale and have more time to pursue the higher margin sales.
Ways to reduce the cost per sale include better marketing to your buyers and a better Sales Pipeline. Increasing conversion rates from 4 out of 10 to 8 out of 10, halves the cost per sale.
The more complex the sale, the more important these factors are to your success and the more important the need for a well designed Sales Pipeline.
May Your Business Be – As You Plan It.
Dr Greg Chapman – The Profit Whisperer
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