The price is right

Christopher Jenkins is right about poor pricing. Pricing has the greatest impact on the bottom line, more so than sales volume and cost reduction.

If you make baked beans and your sales revenues are 100, your goods cost you 50 and your net profit is ten, if you lose ten per cent of your sales you still make five per cent net profit. But if you lose ten per cent of your prices, you’ll lose all your profit. And if you drop your prices by ten per cent will your sales go up? No they won’t. Many have tried and failed.

We’ve now got price deflation in most markets – only in services are prices going up. Hence the following result in the stock market:

Average margins earned in public companies*

20002002

Market average15%4%

FTSE 10019%12%

Small co’s16%7%

Fledgling10%3%

*source Hemmington Scott

When you get a grip on your prices, you’ll get a grip on your company – and not before. It is marketing’s job and marketing is not doing it.

John Winkler

Winkler International,

Brighton

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