EPISODE C5.003 Propose Price Increases for under performing Accounts

Introduction
Here we are in the last week of July and the first month of the 3rd Quarter is ending - how much closer are you to success?

If you have been with us all month, you know we have been railing against the politicians and bureaucrats for acting arbitrarily in response to the pandemic; and any illusion they are making data-based decisions should have been dispelled by now. This is not about a specific political party or group, it is about the arbitrary use of power at the expense of the most important global community - you.

People like us, Living the Life, employ 57% of the planet's population and yet are treated as the source of its problems. Not here, we celebrate the contribution you make to a better society and our focus is to improve your chances of success. 

This week we continue the new programming structure. We use a Balanced Scorecard to format our weekday shows: Finance (Monday) = Operations (Tuesday) + Sales (Customers) + People (Employees) with Fridays dedicated to Owners. Look at the week this way - Monday through Thursday is working IN the Present, Friday is working ON the Future.

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Have a great business week.
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Show Objectives
Touchy subject and best practiced with the lowest risk/impact to the business. Since you have already Top Graded your accounts, the next step is to understand why the bottom 10% are the bottom 10%. Our experience: (1) bottom feeders looking for a deal that will never become profitable - they're gone, (2) very demanding customers that drive the cost of servicing them - you'll cover those costs - if they stay, (3) bad pricing decisions that were our fault, not theirs.

Key Issues - ​Owner/Manager Perspective: 

1. Bottom grading to eliminate no/low profit accounts.
2. Deciding how much to increase prices.
3. How to communicate the increases.

What You Need to Know
Pricing right is the fastest and most effective way to increase profits. A price rise of 1 percent, if volumes remained stable, would generate an 8 percent increase in operating profits - an impact nearly 50 percent greater than that of a 1 percent fall in variable costs, and more than three times greater than the impact of a 1 percent increase in volume.

A 5% price rise increased profitability by 22%, more than equivalent changes to other “tools of operational management”.
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What You Need to Do​

1. Raise prices by 5% to make the accounts profitable.
2. Be upfront and totally clear: we are raising all prices to stay even with cost increases.
3. We will honor all existing contracts at set prices until the contract expires.
4. We will grandfather exiting accounts for 3 months to help defray cost increases or provide time to make other arrangements.
5. We will help you find another suppler.

Shows

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