Quote:
Originally Posted by Ump153
When lowering a price by 50%, expense are not lowered and sales must double to avoid a drop in revenue.
I have been involved in marketing in the entertainment and industrial fields for over 20 years. I have my MBA. I am not guessing.
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I don't have an MBA but I have a calculator. Let's say the book costs $20 to produce and sells for $70. If 1000 are sold the "profit" is $50,000. Revenue is $70,000, but revenue is not the goal, profit is the goal.
Let's say we cut the price in half, the book still costs $20 to produce and if twice as many people buy it due to half off price the Revenue is $70,000 and profit is $30,000. Sales would have to more than triple (3.3333 to be exact) to get the same profit for a price cut in half.
I also expect that the more books are produced the production costs are lowered, but production costs would have to be cut in half for half price reduction in purchase cost and corresponding doubling of purchases to result in same profit.