In this podcast episode, Roland Frasier shares his expertise on how to increase ROI in your business despite inflation. With inflation being the highest it's been in over 40 years, it's becoming harder and harder for businesses to make a profit.
Roland provides five specific hacks that can be applied by business owners and marketers to optimize their pricing strategies, adjust their product and customer mix, optimize their value ladder, optimize profit-based offers, and acquire across their value chain.
[00:26] Inflation is driving up costs, making it harder for businesses to profit. To combat this, you can either fire staff and produce less profit, try to cut expenses, or become a better marketer.
[02:43] First hack: Optimizing your pricing strategy is one of the easiest ways to increase profits. When you raise prices, every bit of increased income goes to the bottom line profit, and there is no additional cost.
[03:47] To figure out your current margin, take the trailing 12 months of profits divided by the trailing 12 months of sales. Once you know this, you can calculate how a 1% price increase will affect profits.
[06:30] Testing prices regularly are important. Even if you are marketing for someone else, price testing your offers is crucial to increasing profits.
[07:00] Increasing prices can lead to a significant increase in profit margins, while decreasing prices can have an inverse effect, decreasing profit margins.
[08:33] There are alternatives to raising prices, such as changing the pricing model, refocusing price attention, and repricing to performance.
[13:00] Annual volume bonuses, increasing product/service efficiency, and upselling/cross-selling are some strategies that can help recapture lost profit margins.
[15:03] There are many different types of promotions and discounts that businesses can offer, including off-invoice promotions, rebates, affiliate discounts, and tiered affiliate programs.
[17:43] To ensure that you're not losing money due to multiple coupon codes or forgotten discounts, it's important to keep track of all purchase incentives and regularly test them.
[19:47] Businesses should use these incentives but be aware of their true cost and how they affect profit margin. It's important to regularly assess and calculate the actual profit margin after applying these incentives.
[20:58] Action steps for improving profitability, including setting target pocket prices by customer size, type, and segment; eliminating or capping stacking of discounts; repricing or eliminating products that are sub-margin; prioritizing selling to high-profit customers, and thinking about off-invoice costs.
[22:52] Second hack: Adjusting product and customer mix, focusing on acquiring customers that make the most money, and rethinking value ladders can lead to improved profitability.
[26:10] Third hack: Rethinking the value ladder by starting high and down-selling can also improve profitability. The importance of testing and optimizing the value ladder, and adding something at the top of the value ladder that would make the whole business significantly more profitable.
[28:26] Fourth hack: Create or add low-cost, high-margin products or services that have high perceived value and produce a high profit.
[30:02] Consider offering one on one coaching or product setup help, automation, done-for-you or done-with-you services, extended coaching or membership, extended warranty, group coaching, live event tickets, upgrades, masterminds, or user groups, sales enhancements, and upgrades, tech support or training packages.
[32:55] Use bundles to improve average order value and margin; consider sensitivity testing price, quality, and quantity sensitivity offers.
[34:12] Create new value propositions for customers by identifying what they value and are willing to pay more for, such as offering snack packs with only 100 calories or selling cold Coke at the checkout for a higher price per ounce.
[36:00] Offer 30-day express sprints instead of 90-day video courses, as people prefer quicker results and accountability.
[36:36] Charge more for custom products and services with longer lead times than in-stock offers.
[37:55] Add low or no-cost digital bonuses to physical products, such as event recordings or tickets to already scheduled events, to enhance their value and encourage customers to act faster.
[38:43] Increase average order value and margin by utilizing existing memberships or group coaching programs.
[39:00] Fifth hack: Acquire across the value chain by buying suppliers, outsourcers, distributors, and affiliates, to capture more profit margin and provide better supply, quicker, higher quality, and not lose anything in the process.
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