In 3 components of effective price management I talked about the need for doing an incremental analysis before making changes to pricing. For instance:
- What is the sales change expected for a given price cut?
- What is the minimum increase in sales required to keep profit at levels before the price cut?
In other words what is the price elasticity of demand for your product and does it justify the price cut?
Here is a real business example of such an analysis for the proposed $10 price cut by at&t for its iPhone subscribers.