Too many companies suffer from deteriorating margins due to inadequate pricing. We all know overheads just keep creeping up however well we look to control them. Many are virtually out of our control – power prices, rates, insurance and the like.

So how do we counter this? Pricing is the key. But our customers may not accept an increase you may say! Well experience shows that it is never as bad as you think. In a prior life I reported to a group director who just demanded we make frequent price increases to keep our margin growing. Resisting was not an option despite our protests that customers would quit. To my surprise it was never as bad as we feared. The price increases were accepted with little more than a whimper. The effect on the bottom line was huge. To gain this kind of margin growth by increasing volume alone would have taken many months, even years.

Now it certainly helps to be providing good service. That is essential. Customers will pay good money for the right service, although rarely admitting this. The cost of changing providers is often just too hard. But do not rely on this at the expense of your service level.

A good client of ours is a member of a corporate gym. His fees have not increased for 6 years. He continues to be surprised that he has not received any increase over this length of time. Even if they did eventually increase by 20-30% he would not change. It is a good location and his gym buddies would miss him. You have to wonder how commercially viable the gym is by not keeping its pricing moving with the times. This type of inaction will sooner or later erode the commercial viability of the business. It is really just poor management.

The lesson is clear. It is nice to gain new customers. However, it is easier to grow by ensuring your current ones are paying a fair price for the excellent service you provide.