Last week’s Apprentice episode raised an interesting question often asked in business. Is it better to sell lots of smaller priced items or a few high-ticket items? In last night’s episode, it seemed that volume won out — but that isn’t always the case.
The Difference Between Volume And Profit
The idea between these two strategies is clear. You either sell lots of a product at a low profit per unit, or sell smaller quantities but have higher profit per unit. Both have their virtues, and it depends on several elements as to which is the best model for your business.
These elements are:
Consumer Perception — Let’s be honest, there are certain items that customers aren’t going to pay a premium for. There might be a price variance, but it isn’t going to be as significant as other products available.
Footfall — Last night’s task was won on footfall. Titans went for scarfs because they knew the department store was famous for it. They also used a live mannequin to lure customers in. This contributed to their win, and they saw more customers through their doors.
In the same way, you need to know about your footfall. If you have a large volume of customers, you can afford to have a lower profit margin as you know more people are going to make a purchase. However, if you have limited footfall — higher prices are best.
Quality — The product’s quality is important. Higher quality = higher value and you can charge more for your product.
Length Of The Sales Process — A retail shop, where products are left on the shelves and it takes moments to process a sale can have a smaller profit margin than those who need to actively sell their product and require a lengthy sales process.
Are your prices right? Do you need to change your strategy?
Let us know in the comments below.