Increase Profits by Increasing Customer Surplus

How do I increase my profits? That’s something every company wants to do. Hi, I’m Steve Doyscher – Your outsourced CMO for hire. And the difference between the cost that it takes to get your goods and services to the marketplace, and the price that you’re asking for those goods and services is going to be your profit. Now, thinking about why someone becomes a customer in the first place is important here. They become a customer because they perceive the value of what you have as higher than the price that they are going to pay. Actually, the difference between perceived value and the price that they pay is known in economics as customer surplus. So, the more customer surplus, the more value someone perceives versus the price that they are paying, the likelier that they are to become a customer. Because basically they are figuring they are getting a greater and greater deal with more of the surplus that they enjoy.

Now let’s think about two different things when we’re thinking about customer surplus. And, how you can think about your business. Number one, do you know exactly what your value is? What is your unique value proposition? If you don’t know exactly why someone should choose your goods or services or both, you need to take a strong hard look at that. Because if you can’t specifically explain why should someone choose you versus someone else, that is an issue. Secondly, let’s say you do know what that value is. Ask yourself this, is it being properly conveyed in all of your marketing? So if you sell goods, is it on your packaging? If you don’t sell goods or if you sell goods and you’re on the internet (and you should be) is it on your website? Is it on your email marketing? Is it across your social media, blogs, et cetera? Is the message of your value being conveyed everywhere in your marketing communications?

So, being able to understand exactly what your value is, and helping to convey that message across all of your marketing communications is going to help people to understand exactly what that value is, and have a higher perception of value, increasing that customer surplus. Being able to do that will allow you to enjoy higher profits as you are able to command a higher price in the marketplace.