For the purposes of demonstration, we are going to assume: A business with a 35% gross margin
- Increase prices by 10%: Gross Margin dollars increase by 29% and Gross Margin percentage by 17%
- Increase prices by 10%: You can lose 25% of your sales volume and still have the same gross margin dollars.
- Decrease prices by 10%: Gross Margin percentage decreases 20% and Gross Margin dollars decrease by 29%
- Decrease prices by 10% and you will need to increase sales volume by almost double to maintain Gross Margin (The fallacy of making it up on volume!
The best way to maximize profit:
Differentiate! Deliver High Value and Price Accordingly.
When you raise prices correctly, you not only will not lose sales volume, you will grow sales volume and profit.
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The next blog: Developing Value Propositions: Why your customers will want to fully compensate you for the value your product or service delivers.