Evidence behind prices.
WHAT TO ESTABLISH FIRST
Actual cost per item or service, including your time and a share of overheads.
WHAT TO ANALYSE
Margin by item Volume at current prices Which items sell regardless of price Which are price sensitive
HOW TO TELL PRICE SENSITIVITY
Compare volume before and after any price change you have made.
That history is more useful than any theory.
WHAT TO LOOK FOR
Items priced below their contribution Items where a small rise would be unnoticed Discounting that has become habitual
THE DISCOUNTING POINT
Quantify what discounts cost annually.
The figure is usually larger than expected.
WHAT TO MODEL BEFORE CHANGING PRICE
The volume you could afford to lose and still be better off.
WHAT THAT REVEALS
That a modest rise usually survives a substantial volume loss.
WHAT TO TEST
A change on one item or segment, measured.
WHAT TO REVIEW
Prices against costs, annually.
