- December 12, 2011
- Posted by: Paul Foster
- Category: Business Growth Advice, Grow a Business, Increase Profits in Business, Managing business revenue
It is fair to state that if you give a customer a ‘deal’, you could sell more than if you didn’t. But instead of giving a discount on price, have you considered adding value instead?
Consider adding value
As an example, if you discount a $1,000 item by 10% to get the sale you get $900. But if you offer an additional item valued at $100 for free as part of the deal, you get $1,000. Since the cost of the $100 item is less than the $100 value, you give away less than a $100 cash discount.
Assuming the $1,000 sale item costs you $700 and the $100 sale item costs you $50, when you discount you make a $200 gross profit ($900-$700). When you value ad, you make a $250 gross profit ($1,000 – ($700 + 50).
That is 20% more gross profit and 5% more to your bottom line.
The choice of what you decide to ‘add’ as value will determine how profitable you will be. A smaller dollar value – high profit margin item is a good consideration. The most important factor is the added item has perceived value to the potential customer.
Now is the perfect time to do some research on pricing ideas. As you shop, try to determine if the ‘deal’ being offered is a smart idea or a simple discount. It is also a great time for being aware of how you make your own purchase decisions.