Richard Maun – Easy Money

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Easy Money

15 October 2017

I’ve noticed that many supermarkets now offer a range of items for £1 …badged with a big ritzy sticker to shout that these bread rolls, cream cakes, yogurts and so on are such amazing value!

Who can resist the temptation of the juicy round pound? Not me! And anyway it’s not like I need much of an excuse to buy cream cakes…

What is fascinating is that a round pound feels like great value because we make the assumption that prices have been rounded down and thus we have a bargain on our hands. 

Do we ever stop to wonder if prices have been rounded up? The simplicity of the £1 deal intuitively feels like good value, but sometimes the truth is we are paying more. 

The supermarkets are brilliant teachers of pricing strategies and we can learn from them. Specifically we can borrow the principle of small price rises.

If we have 100 client transactions in a year and we put up our prices by £1 then we’ve increased our income by £100. Obvious, obviously, but people can forget that that’s actually £500 over 5 years and well worth having. 

It’s easy money because a low price rise is easy to make happen. 

The same applies in reverse and if we ask a supplier to reduce their invoice by £10 we’ve just increased our profits by £10.

Easy money doesn’t mean acting in devious or unethical ways. It means taking small steps that add to our bottom line. 

Have fun this week increasing prices by £1 and remember how little amounts here and there all add up to something worth having.

The good news here is that this blog will remain free of charge! Sometimes even a round pound is too much.

Next week: Succession Planning


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