24Always Price to Value
When it comes to pricing a product or service, it doesn’t matter what it costs to make the product or provide the service. If you make a product for $.10 and it is worth $1.00, then the price should be $1.00. If it costs $2.00 to make a product, and its value is $1.99, then drop the product. If the $1.99 product is new, don’t introduce.
The single most important driver of profitability is price. On average, a 1 percent net increase in price raises net operating profits by 10 to 12 percent. A 1 percent cut in price reduces profitability by 7 to 9 percent. Thus, if you raise the price of a product that sells for $100 to $101, you raise net profits by approximately 11 percent. If your product sells for $1.00, and the salesperson ...
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