SM1.0 How 1% Price Change Gave 11% Profit IncreaseScott Williams
Price is a major determinant of the profitability of your business! A price change of as little as 1% can often lead to profit increases of up to 11%. A consultant study across 1,200 major businesses found that a 1-2% increase in price, assuming demand remained constant, on average would have increased the company’s profit by 11%. Clearly, this could be a quick boost to your company’s profitability.
For a quick example of the impact of a price change, consider a business turning over $500,000 per year. Let us further assume that it makes a 5% profit on that, which gives it a profit of $25,000. If it increased its price by 1%, and assuming demand remained constant, that would lead to an extra $5,000 in income. This extra $5,000 over the original $25,000 is a 11% improvement. This is a yellow belt article.
Price Change Resources
The material in this article on pricing draws heavily on the “1% Windfall: How Successful Companies Use Price to Profit and Grow” by Rafi Mohammed (Harper Collins) available as an eBook.
The Price Change Skills Module teaches how a small price increase can have a dramatic effect on your Profit.
Learn about the tree step approach to pricing, pricing elasticity and economies of scale amongst many others.
The Skills Module is divided into a number of articles: