Eastman Kodak Study
If you’ve ever wondered how much business must increase in order to keep an even keel after cutting prices, here are some figures from Eastman Kodak's research department:
Assuming an anticipated profit of 25% on
selling price, a 2% cut in that selling price means you must
increase your volume of sales by 8.7% to make the same profit obtained
before the price was lowered.
A 3% cut means a 13.6% increase in
sales is necessary.
A 5% cut means a 25% increase in
sales is necessary. A 7.5 cut means a 42.8% increase in
sales is necessary.
A 10% cut means 67% increase in sales
is necessary.
A 15% cut means a 150% increase in
sales is necessary.
A 20% cut means a 400% increase in
sales is necessary.
To reverse the process, or increase
prices:
A 3% increase means the same profit on
90% of sales volume.
A 5% increase means the same profit on
83.5% of sales volume.
A 7.5% increase means the same profit
on 77% of sales volume.
A 10% increase means the same profit
on 71.5% of sales volume.
A 15% increase means the same profit
on 62.5% of sales volume.
A 20% increase means the same profit
on 55.5% of sales volume.
Stop
and think about it.
R.L.
Frazer & Associates, Inc. * PMB 176 * 4815 W. Braker Ln. Ste. 502 * Austin, TX 78759-5618 * 512/346-0455 * Fax
512/346-1071
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