Episode 20: The Most Effective Approaches to Rapidly Grow Revenue - Part 2

Hi everyone, I'm Ben Wright, successful entrepreneur, corporate leader and expert sales coach to some of the most talented people our.

Amazing planet has to offer.

You're listening to the Stronger Sales Team podcast where we bring together and simplify the complex world of B2B sales management. And to help the millions of sales.

Managers worldwide build, motivate and keep together highly effective sales teams.

Teams who grow revenue and make their businesses actual profits along the journey. We also provide great insights and actionable.

Steps to managing your personal health. A happy and productive year is not.

Only better for your teams, but everyone around you. So if you're an ambitious sales leader who wants to build the highest performing and engaged teams, stronger sales teams is.

Right where you need to be. Welcome back to Stronger Sales Teams, the place where we provide real world and practical advice to help you develop super powered B2B sales teams. Last week we focused on part one of our fast Revenue Growth series and that was the three main ways that we can grow revenue quickly. So to recap, that was long term retention. So repeat business from existing customers. And for me that was the gold standard because it had lower acquisition costs, if not no acquisition costs. It had quicker deal cycles and generally less price sensitive customers. So for me it was fast growth but also high margins. The issue here is that you need a customer base to be able to work on long term retention. To start with, the second area was increasing transaction size per customer. So that's more dollars per transaction. So more dollars per transaction means selling extra products at a higher price point or even services that can be consumed down the track. It typically also increases margin because it spreads your fixed costs. However, not always the case when you're shipping in bulk or you have a delivery cost that is very much linear with your sales cost. But regardless, great strategy to grow revenue fast is increasing transaction size per customer. Last but not least was all about acquiring new customers. So this is an expensive option. But once we acquire new customers, we get the opportunity to increase their transaction size, which is option number two, or move them to long term retention, which is option number one. So really powerful. It's the greatest potential for present and future growth. And when you get it right, it multiplies quickly. But we also spoke about making sure that new customers are greater than customers that it's replacing. That is your attrition. So for each of these models, the pricing strategies you employ is crucial. And when I say strategies, I mean strategies plural. Most businesses will have multiple pricing strategies or or they will use different pricing strategies at different time over their Evolution. Today we're going to look at what some of the great strategies are and tips around them as to how you can grow fast. So don't try to memorize these. There's going to be about eight of them. In fact, there's going to be exactly eight of them. But you can download the show notes at the end and have these handy. Right for me, if you can make them part of your playbook. So you can have a base of pricing strategies that you understand. Fantastic for the future because you know when you need to roll them out. At the end of these eight, I'll go through the five or so that think are best for really fast revenue growth. Okay, so first, cost based pricing. Most of us will know this. It is generally the most common form of pricing out there. So we base our revenue or our sales pricing off costs. Downside is it doesn't consider demand. It's internal facing. It's all about the business, but it is very common. So for me this gets used when you're in a stable market or a mature industry or when you've got some really serious competitive advantage. It can also work when you're first to market and you don't want to price too high, but it's temporary, particularly when you're in a competitive market and there's lots of people entering. The pitfalls for cost based pricing is it can be very easy to be overrun if you're not on the pace with market changes or in particular your cost stack. So if your cost stack is one that changes rapidly in your industry and you're slow to embrace it, then you can very quickly fall off the pace when you're looking at cost based pricing. Some examples works really well. Service based industries. Plumbing, electrical, cleaning, accounting, legal. These type of industries are fantastic to work off cost based pricing because generally your work is pretty stable and not changing all that often. Okay, second type of pricing strategy, competition based pricing. This is the opposite of the inward facing cost based pricing and it's outward facing and based on the market at above below what your competition is doing. So you want to be doing this when your market differentiation is low, when you're breaking into a market, when you're trying to take market share or people just don't know about your brand. The pitfall for me though I'm not a huge fan of this type of pricing is because often the value stack will run deeper than pricing. So my issue is that businesses that just price based off competitors will often have fundamental value proposition issues. As a sales leader, you need to find what your value proposition is out to the market and make sure you're offering it. It helps you move very quickly away from compet competition based pricing. That said, there are plenty of industries that use it and have businesses that are very successful in it. Things like car parts, car tyres, fmcg. So fast moving consumer goods. These guys will often use a blend of cost based and competition based pricing. For me the most effective use I've seen of this is a homewares brand that I work with that would run competition based pricing for one cycle and then cost based pricing for another. So they would actually rotate and have a high low pricing model where they ended up picking up both of their customers. So their customers that were very sensitive to pricing but also their customers who are looking for value. Okay, third one, value based pricing. A little bit different to both the competitor and the cost based pricing models. And to be fair, this is probably my favorite pricing model. It's my favorite because it focuses on the perceived value of your product or services. Right. So it's all about the customer. What do they see the value of your product or service being? So by setting prices that are based on benefits or value or what a customer is going to get from a product rather than your cost inputs or what competitors are doing, you can actually meet your customer where they're at. And those companies that meet their customers where they at are traditionally very very successful. So when would you use this? I'd be using it when you really know your customer or you have a unique product. I love this strategy because it's hard to compete with particularly when you know your customer pitfalls for this, it's quite similar to cost based is that you need to make sure you always watch what is coming. If you're not aware of what the rest of the market is doing and your value based pricing is superseded by many competitors who will provide the same level of value at a different price. Then you have something you need to address. So essentially the way to get around that is to consistently be improving your offer or providing extra value to customers. We see this used a lot in consultancy services and profit sharing brands. So businesses that are out there to provide a service that can have exponential value to a business like sales coaching. If you get sales coaching right, it has exponential upside to a team of many people. So in those type of instances value based pricing tends to work. Okay, number four, penetration pricing. This is when you start low and you build high from there. Very much so for quick growth businesses. So what we're talking about Today, but also when you've got low brand awareness or when you have customers that will make fast decisions. The downside of this though is that if you go too low too quickly and you can't build your price, your business doesn't become sustainable. Or even more importantly, if you can only achieve customers at the low price, then you have a significant value proposition issue. That said, again, plenty of places use this. It's a classic supermarket strategy. Start low on a product, bring people in to buy other products. So particularly where you have a private label in a supermarket, you can buy that at a low price, but then there's lots of other products that can be bought there and at a higher level. Okay, number five, skimming pricing. Skimming pricing, you don't see all that often, but it generally will involve having your prices be quite high for your newer or your more innovative products. So you'll maximize your initial revenue from your early adopters and then you tend to drop it down as demand and market competition increase. Right. So they'll gradually lower as you get more and more people in. I'm not a huge fan of it because often skimming pricing is with new tech products or products that are yet to be proven. So you pay a higher price for products that don't necessarily work as well as you want to. That said, it's great for early adoption, but it can also slow growth. It's really hard to grow quickly if you're at a very high price for a product where the value is not proven. But if you get it right, there's serious profit and margins to be made. Okay, number six, premium pricing. Most people know premium pricing. It involves setting higher prices for your products or higher prices for your services that people think have superior quality, that people think have superior performance, or where you have exclusivity on products. It's really, really good for businesses who have multiple products in their suite because they can offer premium pricing on some and more standard cost base or competitor based pricing on others. Right. Classic example is a really established product brand who have got a strong balance sheet to support warranty. So they might offer premium pricing because they know that products have failures. And it's really important for customers to be buying from a brand that will be there to honour that warranty, particularly when products have a long lifetime. The downside though of premium pricing is that it really does depend on the value your customer sees in your brand. So if they don't see the value in your brand and you're pricing a premium level, you're in trouble. It's also much more difficult to get premium pricing right. In tough economic times. There will be staples that people will always spend their money on. But generally people start to look for savings as much as they can. Clearly when economic times are harder. Alright, number seven, this is promotional pricing common strategy when you basically you're offering temporary reduction in price to increase your demand. It is a fantastic way to attract new customers though. Why? Because it reduces the risk. That's what I really like about promotional pricing is it gets people to try your product first with a lower perception of risk and if they like it, they come back. It's also really effective if you're trying to get rid of stock or get price sensitive customers into your business. But for me, when we're talking about high growth, when you're introducing new products or you're trying to compete with other brands, if you can get people to try your product first, then away you go. It's also really good for businesses that want to be attracting more than one type of customer. So again, particularly in retail and fast moving consumer goods, what we'll see is that businesses will try to capture price sensitive customers during a promotion cycle and loyal customers every day. So the loyal customers will buy whenever the product is needed by them. And yes, sure they might buy a little bit more during a promotional period, but it's the price sensitive customers that they'll bring into their mix and can often be a terrific strategy for fast growth if you can bring in customers that you wouldn't otherwise have by your brand. Downside of this though is retention. So you generally need to spend so much time making sure customers come back after a promotion that they can actually become non profitable. So the best brands that Ize see run a really effective promotional strategy is that they'll run their promotion cycle and then over time they'll phase that out. So rather than a once off promotion, they'll have deep dive promotion number one. Then they'll have a slightly lower or different type of promotion for the second usage and then perhaps a gift with purchase or some extra value for their third before they then move to cadence type of pricing. Really effective because you don't lose those customers that bought on promotional pricing without a chance to drive some significant loyalty from them. Okay. Last but not least is dynamic pricing. So dynamic pricing is when you adjust your prices in real time. So it's generally based off demand but often about supply or even time of day. So when people are actually buying, you see this all the time. With airlines, the dynamic pricing goes up and down that you could be paying two to three times at a point in the day than you were a few days earlier. So for me, this pricing strategy works because it can smooth out profit. You can have customers that come in at a low value and customers that come in at a high value and it can average out your margin. The downside of this though is if you get it wrong, you only end up selling at your very low pricing and it ends up putting huge pressure onto your margin. So what are the best ones for growth? For fast, rapid growth, I think there's five. Competition based pricing. When you're entering a really saturated or a really competitive market, going just a little bit below your competitors and ban you away, heed my warning around making sure you can get that pricing up later. Value based pricing, this is my favorite. It's my favorite because it matches what the customer wants. So if you're meeting them where they need to be, then you are in the zone where they are likely to purchase from you. And from there you can get that really rapid growth. Penetration pricing. Quite similar to competition based. But when your brand awareness is low and your competition is low, by coming in at a really low price, you can reduce the risk for a customer to try. Very similar from a promotional pricing point of view. The difference here is that your penetration pricing is often a longer term low price strategy, whereas promotional pricing has highs and lows. I like promotional pricing for fast growth because what it does is it allows you to tap into two types of buyers. You're price sensitive and you're more loyal. As long as you're not burning your loyal customers by having too deep a promotional pricing that they can't access, then it can be a terrific way to pick up new customers. Last but not least, I really like dynamic pricing, mainly because it allows lots of testing to happen. And when you test prices, you can fail fast and really experiment with what works for your business. Okay, so how do we nail this in our business? This is an approach that I would recommend and what I've seen work many, many times. That said, there'll be variations to this. Feel free to get in touch if you want to talk through it. The first one is to look outwards first. So if you can look out before you look in, you'll be able to better understand your market. You'll be able to better understand your customers and what they want. If you're able to determine that they have an urgent need that will impact your pricing. If you're able to determine that they have a particular feature or benefit in your product that is really important. That will be able to influence your pricing and how you market it. If you can understand your customers and then analyze your competition so how competitive your market is and where they price, then you're looking outward effectively. The other area that I look at with an outwards focus are the market dynamics. So what's your demand, what's your supply, what are the trends, what are the market life cycles? Really understand your industry and that will help you determine when you're going to price at different levels. Step two is to then look inwards. Right? We need to assess our costs and we need to assess our profitability if we can understand that cost structure. So if we can understand fixed costs versus variable costs, where our breakeven points are, it just gives us the knowledge to be able to price more effectively. If we can understand the value that our product really brings, and if we can include wider functions in the business to be able to make sure that it's really clearly communicated, then what we're doing is we're using the inwards looking process to drive value for our customers. Super effective. Number three, choose your pricing strategy. Test it, research it, do some A B testing, try it in segments. Don't be afraid to change it, don't be afraid to fail. Because often failure puts you one step closer to success. Monitor it, evaluate it and keep considering the customer value and perception. If your finger is on the pulse and you know what customers think about your pricing, you are far more likely to be effective and successful in selling products. Last but not least, adjust your pricing if you need to. I touched on that a minute ago. But if you are continuously adapting your pricing, then you're never stagnant. It is very hard to catch something that keeps moving. So from a competitive advantage point of view, if you are out there and constantly changing the game and moving the goalposts, then you are a competitor that is to be feared. Okay, so a final word. Pricing is really hard to get right. It doesn't happen first go. And often businesses will need to constantly be assessing it. So if you can accept that the pricing journey is difficult to get right and be prepared to make mistakes, fail fast, review and get it right, then you'll be successful. On the other hand, if you're throwing all your eggs into one basket with one pricing strategy, very high risk. So I'd really consider if there's alternate ways you can run your prices. So there you have it, part two of our revenue series. This was all about achieving fast growth through pricing. Next up we're going to have a look at some growth hacks to really get the lead gen pumping and some of that fast growth happening. But if you weren't able to capture everything from today, please jump onto the show notes in your own time. They're also on the website strongersalesteams.com but if you'd like a little extra help, please feel free to book in a discovery call with me and I'll help you. Specifically ongersalesteam, on Instagram, on LinkedIn, on most of the social media channels. And I'm across almost every connection made into the business, so likely you'll hear from me directly. Okay, before we leave, today's health and wellbeing tip. Last week we spoke about change being painful and to lean into it. Today it's all about discipline creating growth. So discipline comes in many forms. Anything from small acts, daily acts, to large longer term acts. For me, micro changes. So micro discipline leads to growth. If we can make small changes at a mindset level first, then they will lead to the bigger changes down the track. My favourites, appreciation, gratitude and perspective. Appreciate what you have, be grateful for what you have, and have perspective. When things don't quite go right, get them right and you're on your way to micro changes through discipline. It takes practice. Look me up if you ever want to talk about it. I quite like talking about it and as I said last week, I've been in the hurt locker plenty of times, so I'm always happy to get out and embrace it. But until next time, keep living in a world of possibility and you'll be amazed by what you can achieve.

Want to be kept up to date with any of our free materials to help you build the best sales teams possible? Well, the easiest way you can do so is to follow us on your favourite social media channel. We're stronger sales teams on most of them and if you DM us stronger, we'll send you right back some great resources to help you build your super powered sales team.

If you'd like a little more help.

Please get in touch directly and book.

A free discovery call with me.

I run a limited number of these sessions and they're free for my podcast listeners.

I'd love to help you out.

Until then, see you next week for.

Another podcast of stronger sales team.