Cash Flow: Revenue (Actual, Part 3)- Differentiate Products
July 27th, 2009
Copyright © 2009 Integrated Profitability TM
This is the third article on increasing revenue to improve Cash Flow. The first article in the series covered selling more, the second focusing on pricing opportunities. This article concentrates on tweaking your products and product line to generate opportunities to potentially expand sales, increase prices and/or improve profit margin.
● Differentiating Product offerings
Depending upon your business, you might be able to make small differentiations that naturally encourage customers to buy more. Ever notice at coffee shops and fast food places how the drinks are priced? The small one is priced at $x.xx and then each larger size above is a small fraction higher. How many times do you buy the biggest one because it’s “only 15 cents” more? You don’t need the bigger drink, but it is such a good deal.
Assuming the price of the smallest drink is higher than the cost of the largest drink, this type of pricing makes a lot of sense, for both profitability and especially cash flow. That is: the price of the smallest drink is more than the cost of the beverage in all the sizes. So, if somebody buys the smallest drink, you have the greatest profit margin. If somebody buys the largest drink, you have the greatest cash flow. Either size, you win.
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