Sales & Marketing Management

The effects of cutting prices

This chart shows that if you reduce
prices by 10% you would need
11.1% more business to
maintain the same gross sales
dollar volume if your average
gross sales remained the same.

At a 20% discount, you need to
acquire 25% more business to
maintain the same gross dollars
in sales.

This second chart illustrates a more startling fact.

It shows that when you discount
your prices the impact on
profit is even greater.

It illustrates that to maintain the
same dollar profit figure, as
before discounting prices, you
need a large increase in
business.

For example:

If you reduce prices by only 10%,
you would require 33.3% more
business to generate the same
gross profit dollars.

At a 20% discount, you would need 100% more business to generate the gross
profit dollars.

To maintain the same total sales volume

if you give

Percentage of

discount

You will need this

much more business

5% 5.3%

10% 11.1%

15% 17.6%

20% 25%

25% 33.3%

30% 42.9%

33.3% 50%

50% 100%

To maintain the same dollar profit if you

give

Percentage of

discount

You will need this

much more business

5% 14.3%

10% 33.3%

15% 60%

21% 100%

30% 300%

33.3% 500%