Posts Tagged ‘pricing’

Have A Down Payment Pricing Policy To Speed Up Cash Flow

June 29, 2010

by Doug Smith, President, The Woodhaven Group

Does your business perform a unique service or make a custom-made product?  If so, start including a down payment requirement when quoting a price for services or products.  This will dramatically speed up your business cash flow.  Combine this with extended terms from suppliers and that line of credit at the bank may not be needed.

Many companies are reluctant to ask for a down payment out of fear that it will upset the customer.  Our society has trained customers to expect to pay a down payment when purchasing certain products and services.  Most consumers would expect to be asked for a down payment when purchasing a home or car.  Unless your business is a retail transaction in a store where the customer gets the product immediately (ie:  restaurent, drug store, oil change, etc.), then try this tip and see your business cash flow take off.

It should always be a policy that any custom product or service  should require up to 50% down payment.  These funds early in the transaction can be used to offset materials & labor, marketing, and sales cost.  Or, just put the cash in your bank account and earn interest.  By receiving a down payment it also shows commitment on the part of the buyer.

Examples of a few products or services that should be getting up front down payments are:

  • Landscaping projects
  • Website design
  • Home or commercial remodeling of any kind
  • Caterers
  • Interior decorators
  • Direct mail design and production
  • Tailoring
  • Machine shops
  • Excavation
  • Dock repair or replacement
  • Mold remediation

Always make sure a complete purchase order or contract is signed by both parties spelling out the contract price, amount of down payment and balance owing so there is no misunderstanding at the end of the job how much the final payment will be.

Put this pricing policy in place today and watch your business cash flow immediately increase.

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Price Bundling and Product Bundling Can Increase Sales and Cash Flow

April 8, 2010

by Doug Smith, President, The Woodhaven Group

Sales are down. Cash flow is tanking. It’s easy to blame the lousy economy. Your customer would buy more if they could. Or so they say.

Well here is one solution to consider. Adjust your pricing but not the way you may think. I’m not talking about cutting prices in the hopes that tired strategy will increase sales. Any fool can give it away and end up losing profit.  I am suggesting using a strategy that as a consumer you participate in everyday and like it. The result ends up increasing your average sale, always a good thing when overall sales also increase.

Its called bundling. Some call it price bundling, some call it product bundling. There have been study after study done on this type of pricing with a lot of names given to it.  All I know is if done properly many good things can happen for your business:  1.) overall sales may go up, 2.) average sale can go up, 3.) gross margin dollars should see an increase, 4.) and potentially your marketing cost could go down. All good things for your cash flow.

Bundling occurs when instead of a prospect buying one item for one price they buy a bundle of products or services for one price. An important element in this form of pricing strategy is the prospect must see added value in the combination of these products for the price being asked. It won’t do any good to bundle together products or services that the prospect doesn’t care about when sold separately. But watch what happens if you can bundle “hot ” items together.

The important take away here is for your company to test to see what combinations work for both the company and the customer. Measure the results on a small sampling. If it works then roll it out. If not then adjust until you find a win-win  for everyone.

Here are examples:

  • Happy Meals at MacDonald’s
  • New cars with “standard equipment included.”  I saw a car with 38 standard items included.
  • Buy two suits and get a free shirt and tie
  • “Gift with Purchase” cosmetics in a department store
  • Vacation packages that include hotel, airlines, and car
  • Car wash with clearcoat  wax, underbody, rust inhibitor, and wheel bright
  • Free xrays with a package of chiropractor appointments
  • Get a free cell phone with a 2 year contract
  • A dozen red roses.  You can also bundle one product into a larger commitment. Whats wrong with 1 rose?

You get the idea.  Find out what works for your company and integrate this powerful sales and pricing strategy into your  marketing mix. 

I would be interested to hear your thoughts on this. Has anyone had a bundling success story they can share with the rest of us?