5 Proven Ways to Increase Your Profit in Business

Thursday, August 2, 2018

5 Proven Ways to Increase Your Profit in Business


               How Psychology Can Increase Your Profit !

Everyone wants to increase the profit of their business, everyone wants to make more money. But, most of the people don't know how to maximize their profits in order to make more money.

Everyone wants their business to be as big as the Big players like Google, Microsoft, Facebook, Apple, and Amazon but nobody can even come close to a level of these companies.

Nobody knows that these Big players know very well what their consumers want?, What are their needs?, To what group of people a specific product should be targetted?

They have separate divisions, separate teams specially built to address these questions.

The sole reason for the success of these big companies is these companies know what they are doing, and what should be done in order to make more profit.

Another reason for their success is they never think in terms of making the profit only, but their only focus is to solve a specific problem that everyone faces and they provide the best solutions for those problems and automatically their business grows, reaches to more people, making them a lot of profit.

Let’s take an example of ‘Reliance Jio’,

Before Reliance launched Jio in the market, the cost of 1GB of the internet for 28 days was touching almost Rs. 200 in Mid 2016. But after Jio’s launch, the cost of 28GB of the internet for 28 days i.e. 1GB per day is now almost Rs. 150 in 2018.

What Reliance did was very simple. They identified the problem that all of us were facing provided a solution to that. Initially, they launched Jio on trial basis in which you can use the unlimited Internet with no cap on speed. This initial step by Reliance made their consumers get addicted to their high-speed internet service which was absolutely free.

People got addicted to it so much that they can’t resist themselves of using unlimited high-speed internet daily. Then Reliance once reached their target number of users, they regulated this internet service with a verrry low price, which everybody could afford and in addition to that, they also provided unlimited calling service.

Now, what we can learn from this example is, In order to increase profit in any business you have to know the psychology of consumers. You should know, what they want?/what they need?

By identifying these two things anybody can succeed in their businesses and make a huge profit out of it.

Sounds interesting?

Now, let’s jump to our main topic of ‘5 Proven Ways to Increase Your Profit in Business

Here are some quick and simple proven psychological tips you can use to increase your profit in the business,

1. Based on the consumers, increase the quantity/volume of products/services they're buying from you.
  
A good example of this is in a large multinational where you sell into one division or regional office and use this as a beachhead from which to expand,

2. You introduce new products/services to existing consumers that they will pay for.

Work on your vendor credibility and introduce a line or brand extension to replace an incumbent vendor. Oracle does this fantastically well, usually through acquisition. 

3. The Compromise Effect

The compromise effect states that consumers give preference to “median” products, or in psychological terms, it relies on the assumption of “extremeness aversion”. Given the choice between three different products, consumers are not likely to opt for the cheapest one because they assume that it is inferior in quality to the other two.

They will not choose the most expensive product either as they assume that this product has unnecessary non-essential features. They will, therefore, choose the median product because this type of product is likely to have an acceptable level of quality and will only contain the necessary features.

4. The Attraction Effect

To illustrate the attraction effect, let’s take the example of The Economist that implemented a decoy pricing method for its printed and digital editions.

The printed edition cost $150 a year, the digital edition cost $50 while the bundle containing both the printed and the digital editions also cost $150 just like the printed edition alone.

The printed edition sold on its own (without the digital version) can be viewed as a decoy pricing method aimed at encouraging consumers to buy the whole bundle.

5. Decoy pricing

Decoy pricing is a tactic that boosts sales of high-profit items by creating another version of the product solely to make the pricier versions seem economical by comparison. It forces people to compare the pricing options, and as a result sales of the more attractive higher-priced item will increase.

Decoy Pricing can also point the consumer to the medium-priced option when they see the cheapest version as inferior and the highest-priced version as too expensive for the likes of them – the middle option is a compromise between the cheapest and most expensive and they feel satisfied that they have the best deal because it offers them the best value.

Why are people "fooled" by Decoy Pricing?

Are we all losers or what? No, it's all to do with cognitive biases. These are the tendencies of our brains to think in certain ways, they are “unconscious” triggers that make different connections in our brain to help us make decisions that lead to systematic deviations from a standard of rationality or good judgment.

Conclusion,

In order to increase profit out of a business, there are only a few things to keep in mind which are,

1. Know what you are doing?

2. Identify a specific problem in a particular field.

3. Provide a reasonable solution to the consumers and make a strategy to not let them go. (Try to make them addicted to your service like we have seen in Jio’s example but do keep in mind your solution must be useful to the consumers)

4. Consumers are often not capable of comparing products that are very different from each other and that have very distinct usage. However, they are usually able to compare products that are similar to each other and therefore to understand the differences that may exist in the closely-aligned items.

In other words, consumers prefer to make a rational choice which is a limited scope of products – the very essence of decoy pricing.


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