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Raising Prices Almost Always Make You More Money But...

Name: Raising Prices Almost Always Make You More Money But...
Uploaded: 2024-09-02T01:30:07+00:00
Duration: 53 s
Channel: Shanli Liu, CPA, CTP
Description: In this short talk, Shanli Liu, CPA, CTP explains why raising prices typically increases overall profit, even if it reduces the conversion rate. She…

2 Sept 2024 · 1 min

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In this short talk, Shanli Liu, CPA, CTP explains why raising prices typically increases overall profit, even if it reduces the conversion rate. She shares a concrete example: a product costing $500 sold for $1,000 (50% margin). Doubling the price to $2,000 while experiencing a 35% drop in conversion still raises absolute profit from $500 per unit to $1,500 per unit, effectively more than doubling total profit despite fewer sales. The speaker emphasizes the need for confidence to test larger price hikes and highlights that higher margins can offset lower sales volume.

Chapters

Raising prices almost always makes you more money, but you hear no more often. So a lot of people are like really afraid of like 10% or 20% increases. Like I'll test 4x, 5x price differences. But the thing that you have to have when you do this is the balls or the stomach to deal with more nos. We had a 35% reduction in conversion percentage, but we doubled the price. And so we made more money in multiple ways. So one, we made more absolute revenue. We literally just made more top line. But the magic of this is that, so let's say the cost of our thing was $500 and we sold the thing for $1,000. Okay. So we have 50% margins. Well, if we double the price, we go from making $500 in profit to $1,500 in profit. Me doubling the price with a one-third reduction in sales still doubled the profit in absolute amounts despite selling one-third fewer customers.