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Increase or Decrease Your Prices??

Price Increases versus Price Decreases.

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Table A
This table shows the affect of Price Decreases.

If you decrease your prices by the percentage number on the left you will need the increase of business shown to retain the same cash profit.


Retail Price Reduction Existing % Gross Margin Being Achieved.
35% 40% 45% 50% 55% 60% 65%
Volume increase required for the same gross margin
2% 6 5 5 4 4 3 3
4% 13 11 10 9 8 7 7
6% 21 18 15 14 12 11 10
8% 30 25 22 19 17 15 14
10% 40 33 29 25 22 20 18
12% 52 43 36 32 28 25 23
14% 67 54 45 39 34 30 27
16% 84 67 55 47 41 36 33
18% 106 82 67 56 49 43 38
20% 133 100 80 67 57 50 44

Example: If you decrease your prices by 6% (Ordinarily making 50% margin) and this causes your sales to increase by 6%, it is not worth doing as you will be 8% margin worse off.

Table B
This table shows the affect of Price Increases.

If you increase your prices by the percentage number on the left you can loose business volume shown and retain the same cash profit.

Retail Price Increase Existing % Gross Margin Being Achieved.
35% 40% 45% 50% 55% 60% 65%
Volume increase required for the same gross margin
2% 5 5 4 4 4 3 3
4% 10 9 8 7 7 6 6
6% 15 13 12 11 10 9 9
8% 19 17 15 14 13 12 11
10% 22 20 17 17 15 14 13
12% 26 23 21 19 18 17 16
14% 29 26 24 22 20 19 18
16% 31 29 26 23 23 21 20
18% 34 31 29 26 25 23 22
20% 36 33 31 29 27 25 24

Example: If you increase your prices by 6% (Ordinarily making 50% margin) and this causes your sales to fall just 6%, then it is worth doing as you will be 5% margin better off.
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