The Profit Prophet

This is a sad tale of technology that I hope you will enjoy? An unemployed man is desperate to support his family of a wife and three kids. He applies for a janitor's job at a large firm and easily passes an aptitude test. The human resources manager tells him, "You will be hired at minimum wage of $5.35 an hour. Let me have your e-mail address so that we can get you in the loop. Our system will automatically e-mail you all the forms and advise you when to start and where to report on your first day." Taken aback, the man protests that he is poor and has neither a computer nor an e-mail address. To this the manager replies, "You must understand that to a company like ours, that means that you virtually do not exist.. Without an e-mail address you can hardly expect to be employed by a high-tech firm. Good day." Stunned, the man leaves. Not knowing where to turn and having $10 in his wallet, he walks past a farmers' market and sees a stand selling 25 lb. ...

With times being so tough, most companies feel that the only way to attract new customers is to lower their pricing. While doing so in some cases will generate a short burst of activity and increased revenues, as a standard, long term course of action, it is not a wise thing to do . The first reason why it is not a good idea to lower your prices is that your associated costs have not been lowered, and in order to make the same amount of profit, you have to sell a higher percentage of product just to stay even. A case in point, if you lower your prices by 20%, you need to increase your sales volume by 25%. If you reduce your prices by 30%, then you need a correspondent increase in sales VOLUME of 42%; a 40% discount needs a 67% increase in sales. I think you see where this is going. Unless there is a huge amount of elasticity in your pricing (where volume increases appreciably more with a price reduction), that without corresponding lowering of your costs, a reduction in price is ...