Mike AndesFounder, Augusta Lawn Care and Homeworks · Founder of Homeworks and Augusta Lawn Care

My plans to INCREASE profit margins 📈

29 Jun 2023 · 1 min

Watch on YouTube

0:58

A short YouTube talk (by Mike Andes) explaining a simple pricing experiment: changing price points shifts which customers buy and thus alters close ratios and profit margins. The speaker gives concrete examples: charging $1,200 yields a 50% close ratio; lowering to $1,000 increases close ratio to 75%; raising price into a higher band (about $1,300–$1,400) reduces volume but attracts price-insensitive, higher-margin customers.

Questions this video answers

50%.

$1,000.

75%.

About $1,300–$1,400 (quoted as "say 13, 1400 dollars").

Chapters

We're going to see what happens when we lower price and what happens to our close ratio. So when value is greater than price, the transaction takes place. So If I charge $1,200 for this job, I would have a 50% close ratio. But you know what? I'm not happy with 50%. I need to close a couple more jobs. So what am I going to do? I'm going to lower price from $1200 all the way down to $1000. And now because value number 5v5 and value number 6, this customer, they also see enough greater than the price. And therefore now I have a close ratio of 75%. But when they go into profit mode, what are we going to do? We're actually going to raise prices but our price goes up, say 13, 1400 dollars. And now I'm only going to close these three customers. These are the customers that we all want. They're price insensitive. They don't care about the price, they just want the job done. And that's when your high profit margin work gets done.