The power of pricing
April 19 2023
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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.