Identify the Customer Behaviors that Drive Profitability
Are your customers helping you maximize profits?
One of the keys to setting your prices in the best way possible is to understand what customer behaviors most effect profitability and then to set your prices to drive that behavior. The first step is to develop a financial model for your company. This will allow you to see how changes in various strategies affect profitability. The second step is to construct a pricing strategy that will motivate your customers to take actions that will maximize your profitability.
For example, if you had a child daycare facility, a financial model might show you that increasing the number of children from 50% of capacity to 90% of capacity will increase profits by 700%. This might be true because your total costs (administration, space, daycare providers) do not vary very much when you have a few children compared to when you have much higher numbers. In other words, costs are relatively constant at lower or higher capacity utilization.
In this case, the actions to take would focus on driving an increase in the number of children that attend on a daily basis so that most capacity is used.
In terms of pricing strategy, the approach is to create pricing packages that will offer higher discounts for more use of the daycare but also to create packages that allow you to incentivize customers to use daycare on slow days so that the average capacity utilization is high.
Call today or use the reply box for a free, no obligation consultation to find out how Apollo can assist your company in identifying the customer behaviors that drive profitability.
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