SM1.0 How 1% Price Change Gave 11% Profit Increase

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.

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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.   

SM1.2 Longer Term Pricing Systems

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%.  You can make quick changes by changing your existing pricing by a percentage figure that, essentially, you think you can get away with.  However, in the longer term, you might want to develop a system to your pricing so that you get a method of getting the best prices you can.  Price is one of the major determinates of Revenue so it is an important issue to be aware of.  This is a blue belt topic.

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