How Pricing Options Can Increase Profit Margin Without Working More Hours

More Customers Aren’t Always the Answer

Many construction and service business owners believe there are only a few ways to increase profit:

• Get more leads.
• Win more customers.
• Complete more projects.
• Work more hours.

But what if you could increase your average profit margin without simply adding more work?

One opportunity may already exist inside your current pricing strategy.

Give customers multiple profitable pricing options.

Instead of presenting one price and forcing customers into a yes-or-no decision, a strategic Good-Better-Best pricing model allows customers to choose the level of value they want.

When each option is intentionally priced for profit, customers choosing higher-value options can increase both your average selling price and your average profit margin.

This is Time Investment Principle™ #5: Pricing Options Increase Profit Margin.

Why Offering Only One Price Can Limit Profit

Imagine a contractor evaluates a project, calculates the true cost of completing the work, and presents the customer with one price:

$10,000

The customer now has only two choices:

YES — Buy

NO — Don’t Buy

Even if the customer wants additional quality, convenience, protection, or service, there is no option to purchase it.

The contractor has effectively decided how much value the customer is allowed to buy.

Now imagine presenting three genuinely differentiated options.

Instead of asking:

“Should I spend $10,000?”

The customer begins asking:

“Which option is best for me?”

That changes the buying decision from whether to buy to what to buy.

Matthew 13:23 and the 30–60–100 Pricing Framework

Jesus provides an interesting picture in Matthew 13:23:

“But the seed falling on good soil refers to someone who hears the word and understands it. This is the one who produces a crop, yielding a hundred, sixty or thirty times what was sown.”

— Matthew 13:23 (NIV)

The same seed produced different levels of fruit:

Thirty. Sixty. One Hundred.

We can use that picture to create a simple framework for profitable pricing options.

30 — GOOD

Provide the essential solution to the customer’s problem with a profitable entry-level option.

60 — BETTER

Provide the essential solution plus additional value, convenience, protection, quality, or service at a higher profit margin.

100 — BEST

Provide your most comprehensive solution with the greatest level of value, convenience, protection, quality, or result at your highest profit margin.

The objective is not simply to create three prices.

And it is not simply to charge more.

The objective is to create more value and give customers the freedom to choose how much value they want to buy.

Profit Illustration: One Price vs. Three Pricing Options

Suppose a contractor’s true cost to complete a project is:

$7,000

Using a single-price model, the contractor sells the project for $10,000.

The project is profitable.

But now suppose the contractor develops three genuinely differentiated pricing options.

The difference is significant.

The Better option requires only $800 in additional delivery cost compared with Good but produces an additional $1,200 in gross profit.

The Best option costs $2,000 more to deliver than Good but produces an additional $3,000 in gross profit.

That means the Best option produces:

• $6,000 in gross profit
• compared with
• $3,000 for Good.

The contractor has doubled the gross profit generated by the project without needing another lead, another customer, or another entire project.

That is the potential power of profitable pricing options.

How Pricing Options Can Increase Average Profit Margin

There is an important distinction between increasing revenue and increasing profit margin.

Simply adding expensive upgrades does not automatically improve profitability.

The economics work when:

The incremental selling price exceeds the incremental cost of delivering the additional value.

Look again at the example.

Moving from Good to Best increases the selling price by $5,000.

But the additional delivery cost is only $2,000.

That leaves an additional $3,000 in gross profit.

As a result, gross margin increases from 30% to 40%.

This is why the design of the pricing options matters.

Your Better and Best options should contain additional value customers care about—but that does not cost your business dollar-for-dollar to provide.

What Can You Add to Better and Best Pricing Options?

The exact value will depend on your construction or service business.

Potential differentiators include:

• Higher-quality materials
• Faster project completion
• Priority scheduling
• Extended warranties
• Preventive maintenance
• Additional services
• Enhanced protection
• Greater customization
• Longer-term support
• Increased convenience

Instead of asking:

“What can we add so we can charge more?”

Ask:

“What additional value would our customers willingly pay for that costs us significantly less to deliver?”

That is where a Good-Better-Best pricing strategy becomes a profit multiplier.

Don’t Assume Every Customer Wants the Lowest Price

One common objection to multiple pricing options is:

“My customers will just choose the cheapest option.”

Some will.

And that’s perfectly fine—as long as your Good option is profitable.

But customers don’t all buy for the same reason.

Some value:

• Price
• Quality
• Faster completion
• Greater protection
• Convenience
• The most comprehensive solution available

When you present only one option, you make that decision for them.

When you present multiple profitable options, you allow customers to decide which combination of price and value is right for them.

Every Pricing Option Must Be Profitable

This is critical.

A Good-Better-Best pricing strategy should never disguise an unprofitable entry-level price.

Your Good option should already produce an acceptable profit margin.

Better should improve the value proposition and economics.

Best should deliver the greatest customer value while potentially producing the strongest profit contribution.

That is why Time Investment Principle™ #4 comes before Principle™ #5.

Principle #4

Price for Profit, Not for Busyness.

First, build profit into your price.

Then apply:

Principle #5

Pricing Options Increase Profit Margin.

Build choices into your pricing.

First, build profit into the price. Then build choices into the pricing.

Use the TIME Multiplier™ to Create Profitable Pricing Options

You don’t have to redesign your entire pricing system at once.

Start with one product or service.

TARGET

Choose one product or service you currently sell with a single price.

INVEST

Create three profitable options:

• Good
• Better
• Best

Calculate the true cost and desired profit margin for each option before determining the selling price.

MEASURE

Track which pricing option each customer selects.

Measure:

• Good selection rate
• Better selection rate
• Best selection rate
• Average selling price
• Average gross profit
• Average gross margin

Don’t measure revenue alone.

EVALUATE

Review the results.

Ask:

• Which options are customers choosing?
• Which features influence buying decisions?
• Is your average selling price increasing?
• Is your average profit margin increasing?
• Are certain features costing more than customers are willing to pay?

Use actual customer behavior to continually improve your pricing structure.

MULTIPLY

Once your Good-Better-Best pricing model consistently produces the desired results, turn it into a documented system.

Standardize it across your:

• Estimating
• Proposals
• Sales presentations
• Sales conversations
• CRM
• Team training

Now profitable pricing options are no longer dependent on one salesperson remembering what to offer.

They become part of how your business operates.

More Work Is Not the Only Path to More Profit

This is the larger lesson.

When profit is inconsistent, the instinct is often:

“We need more leads.”

Then:

“We need more customers.”

Then:

“We need more projects.”

Eventually:

“We need more people because everyone is too busy.”

But before adding more work, examine the economics of the work you already have.

Ask yourself:

• Could we create more value?
• Could customers choose different levels of that value?
• Could higher-value options increase gross profit faster than they increase delivery costs?

If so, increasing profit may not require working more hours.

It may require a better pricing system.

One Price or Three?

Start with one offer in your business and ask:

Where could three profitable pricing options replace one price?

Then build:

• 30 — GOOD
• 60 — BETTER
• 100 — BEST

Make every option profitable.

Create meaningful differences in customer value.

Measure what customers actually choose.

Then improve and standardize the system.

Because growing profit doesn’t always require chasing more work.

Sometimes it starts by giving customers better choices.

Discover Where Profit May Be Hiding in Your Business

If you’re unsure whether your current pricing consistently produces the profit your business needs, schedule a complimentary More Profit Review.

We’ll help you identify where profit may be hiding in your business and where your systems may be leaving money on the table.

www.moreprofitmap.com

Grow more profit in fewer hours.