Cash Flow: Revenue (Actual, Part 4)-Differentiate Services
July 30th, 2009
Copyright © 2009 Integrated Profitability TM
This is the fourth article on increasing actual revenue to improve your company’s Cash Flow. The last article focused on differentiating products to create opportunities to increase prices or to naturally influence customers toward certain products. This one looks at the same type of opportunities for services.
● Differentiating Service offerings
Similar to differentiating your products, this approach adjusts the level of service that is provided, either as an adjunct to a product (such as extended warranties with differing coverage and differing lengths) or as differing levels of service (as when spas offer a series of more and more complete packages).
Differentiating your service levels usually also has an expense component. More service costs more to deliver–and we will cover that side of the equation in the articles on the expense side of improving Cash Flow. For the revenue side, the better the level of service, the higher the price. The higher the quality of the service, especially in comparison to competitors, the more a premium price may be charged.
Cash Flow: Revenue (Actual, Part 2)- Increase Prices
July 23rd, 2009
Copyright © 2009 Integrated Profitability TM
This is the second article devoted to improving Cash Flow by increasing actual revenue, as opposed to merely adjusting the timing of revenue. The last article of this series covered increasing sales.
Revenue consists of two pieces:
1) a unit of something (e.g., a product, a service, a period of time)
multiplied by
2) a price
The previous article concentrated on increasing the number of units; this article focuses on increasing prices to improve Cash Flow.
● Increase prices
Every business, market, product/service suite and customer base is different. The ability to increase prices is dependent upon many relative characteristics across all four areas, and how they, at the current moment, are interconnected. For example, who has relative market leverage: buyers or the seller? If you have leverage, there is a better chance you will be able to increase prices, without causing a more-than-offsetting decrease in sales. If not, you don’t.
More importantly, where is your product/service placed in the range of similar offering? How is it perceived by the market? If it is one of high quality, then prices may be able to be increased. If you know that your product and service is the best quality and value in the market, but your customers don’t know it, then you have some marketing homework to do. In order for someone to pay a higher price, he or she most perceive that the product/service is better and deserves the premium.
How does your product/service compare to the competition?
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