The Amazing 1% Price Increase


Join us on October 17, 2013 at 1:00 EDT for a free Webinar on
How to Price Your Education Products.

When I was speaking earlier this year at Great Ideas I made a comment about pricing that obviously caught the attention of the attendees. It had been my intention to post it here, but I forgot about that intention until this morning when I was reviewing an article I wrote a while back on pricing online education. (You can find this, along with a lot of other free resources, in our resource center.) The comment, in a nutshell, was that while many organizations resist raising prices – particularly in tough economic times – a small increase can, in fact, have a significant impact. Couple this with the fact that many organizations under value – and, as a result, under price – their educational offerings in the first place, and there is a compelling argument for at least considering price increases. Here’s what I wrote in the article:

[I]t is well established that an increase in price is one of the most effective ways to increase profit.  A study by the consulting firm McKinsey & Co. way back in the 1990s showed that a 1% increase in price translates into an 11% increase in profits. On the other hand, increasing volume by the same amount resulted in only a 3.3% increase. Cutting variable costs by 1% resulted in a 7.8% increase and cutting fixed costs – only a 2.3% increase.

The McKinsey study has been cited in a wide range of places, but I came across in Todd Sattersten’s excellent eBook Fixed to Flexible – which I highly recommend. Actual results at your organization may vary, of course, but this is certainly an area where some judicious experimentation on an ongoing basis is warranted.

If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: