Price vs. Volume Tradeoff
Every business, whether selling products or services, faces a familiar dilemma: lower the price to attract more customers or maintain higher prices to protect profit margins.
| PRICE % REDUCTION | CURRENT GROSS PROFIT MARGIN | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 5% | 10% | 15% | 20% | 25% | 30% | 35% | 40% | 50% | |
| Volume % Increase Needed to Maintain Current Profit Margin | |||||||||
| 2.0% | 67% | 25% | 15% | 11% | 9% | 7% | 6% | 5% | 4% |
| 3.0% | 150% | 43% | 25% | 17% | 14% | 11% | 9% | 8% | 6% |
| 4.0% | 400% | 67% | 36% | 25% | 19% | 15% | 13% | 11% | 9% |
| 5.0% | -- | 100% | 50% | 33% | 25% | 20% | 17% | 14% | 11% |
| 7.5% | -- | 300% | 100% | 60% | 43% | 33% | 27% | 23% | 18% |
| 10.0% | -- | -- | 200% | 100% | 67% | 50% | 40% | 33% | 25% |
| 15.0% | -- | -- | -- | 300% | 150% | 100% | 75% | 60% | 43% |
