Imagine we run a simple business making and selling rubber dog toys.

Each costs $8 to manufacture and we sell them for $10, making $2 on every sale.

If we sell a million units our gross profit is $2m. Very simple.

Here's where things get interesting:

If we reduce our price by just 4% (to $9.60), how many more units do we need to sell to make the same $2m profit as before? The answer, which shocks most people, is an extra quarter of a million units! 25% more sales, to compensate for just a 4% price drop.

By contrast, if we increase our prices by just 1% (to $10.10) how much more profit will we make if we sell a million units as before? An extra $100,000 — 5% more for nothing!

As you can see, the impact of minuscule price changes on profitability is typically massive, especially for big businesses. So why are arguments for CX investments so often based on the same bilge about retention, loyalty and satisfaction, all of which do nothing to increase contribution margins? It's shocking when you think about it.

If improving our customer experience gave us greater pricing power — reducing the need for discounting, or allowing us to charge just half a percent more for example — the top and bottom line benefits to the company would be off the charts!

See this post on LinkedIn