There is always the temptation to reduce prices when sales are a bit sluggish. It is one of the most over used marketing strategies around, and it can be a recipe for disaster. What many people don’t understand is the volume of sales that is required to recoup the discount given away.
Here are some statistics that may surprise you. If your present gross profit is 20% and you cut your prices by 10%, you will need to increase your sales by 100% just to break even on the discount. It is even worse the lower your gross margin. If we use a gross margin of 15%, you will need to increase your sales by a staggering 200% to break even.