Masonry Magazine April 1987 Page. 43
PRICE vs. VOLUME TRADE-OFF
When the economy slows down and volume begins to decline, the tendency is to cut price. A close look at the price vs. volume relationship, however, may alter the mason contractor's thinking about his pricing. Donald D. Juchartz, county extension director at Michigan State University, has compiled the following table concerning price cuts and increases in relation to volume:
| If You Cut Your Price by (% Below) | If You Raise Your Price by (% Below) |
|---|---|
| - 3% | + 3% |
| - 5% | + 5% |
| - 10% | +10% |
| - 15% | +15% |
| -20% | +20% |
| You Will Have to Raise Your Volume (by % Below) to Maintain the Same Profit | Your Volume Can Decrease (by % Below) to Maintain the Same Profit |
|---|---|
| + 13.6% | -10.0% |
| + 25.0% | -16.5% |
| + 67.0% | -29.5% |
| +150.0% | -35.5% |
| +400.0% | -42.5% |
NOTE: All of the values listed above are approximate.
According to Juchartz, a 20% price cut means a 400% increase in volume is necessary to make the same profit you were making before you cut your price. In a declining market, it is difficult at best just to maintain volume.
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MASONRY-MARCH/APRIL, 1987 43