The power of pricing

The power of pricing
Rahim Hasan Mahmud

Rahim Hasan Mahmud

April 19 2023

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Mckinsey and Company found that pricing is key for online stores to increase profits. A 1% price rise, with stable volumes, can generate an 8% increase in profits - far greater than reducing costs or increasing volumes. Price cutting to

Pricing right is the fastest and most effective way for an online store to increase profits. Mckinsey and Company in 2003 published a seminal article, where they analysed the importance of pricing  of the S&P 1500 companies. According to their findings, a price rise of 1 percent, if volumes remained stable, would generate an 8 percent increase in operating profits —an impact nearly 50 percent greater than that of a 1 percent fall in variable costs such as materials and direct labor and more than three times greater than the impact of a 1 percent increase in volume.

A strategy based on cutting prices to increase volumes and, as a result, to raise profits is generally doomed to failure in almost every market and industry.

Rahim Hasan Mahmud

Author

Rahim Hasan Mahmud

Mr Mahmud, is a pricing zealot,  studying customer behaviour and pricing strategies to provide insights and recommendations to help online stores optimize their pricing and increase profitability.