Abstract
Pricing is an important strategic lever for a firm’s profitability. The bottom line impact of pricing is well demonstrated by the fact that a mere 1 percent increase in price can lead to 15–20 percent increase in the bottom line when no increase in cost and no decrease in demand can be assumed. For example, for a product the current price of which is $10.00 and profit margin is 5 percent ($0.50), when the price of this product increases 1 percent from $10.00 to $10.10, the price increase of $0.10 goes directly to the profit since no cost increase is assumed. This 1 percent increase in price results in an increase in profit by 20 percent ($0.10/$0.50).
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References
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© 2011 Sunmee Choi
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Choi, S. (2011). Practical Pricing and the Restaurant Industry: Application of Revenue Management Principles to Pricing Menus and Services. In: Yeoman, I., McMahon-Beattie, U. (eds) Revenue Management. Palgrave Macmillan, London. https://doi.org/10.1057/9780230294776_17
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DOI: https://doi.org/10.1057/9780230294776_17
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-31713-4
Online ISBN: 978-0-230-29477-6
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