“For every complex problem, there is an answer that is clear, simple, and wrong.” – H. L. Mencken
It’s easy to believe that if you lower prices, sales will go up. And to some extent, that’s true. But like most half-truths in business, it’s also dangerously misleading.
This belief—lower price = more sales—is a perfect example of a simple answer to a complex problem. It’s easy to understand, easy to justify, and often backed by feedback from the field. Unfortunately, it often leads to a quiet but significant destruction of profitability.
The Appeal of Simplicity
Sales teams hear it constantly: “Your price is too high.”
When sales slow down, it’s tempting to see that objection as truth. Over time, that repetition builds cognitive bias:
- Recency bias: Recent feedback weighs heavier.
- Confirmation bias: We interpret new information as proof of what we already believe.
- Availability bias: We rely on the most readily available explanation.
Eventually, sales teams start believing that price is the reason they’re not closing deals—and that if they just had lower prices, sales would take off.
The 8.5% Margin Mistake
I worked with a specialty distributor who learned this lesson the hard way.
Over a 6-month period, their sales had dipped to around $1.2 million, which represented a 16.1% decline in average monthly sales compared to the previous year. Margins held at about 35%. Feedback from the sales team and customers was consistent: “Your pricing is too high.”
So, in an attempt to regain momentum, they made a bold move—cutting their general matrix pricing down to 26.5%, an 8.5-point drop in gross margin.
What happened?
They saw a modest 4.5% increase in sales. But their gross profit dollars dropped by roughly $15,000 per month.
They gained a little on top line—but lost big on the bottom line.
Why This Happens
The problem isn’t that price doesn’t matter. The problem is believing it’s the only thing that matters.
In most B2B buying decisions, price is just one part of a much larger equation. Buyers also weigh:
- Inventory availability
- Delivery speed and accuracy
- Ease of doing business
- Invoicing and returns
- Relationship and trust
- Brand familiarity
- Risk of switching suppliers
When a distributor offers the lowest price—but isn’t the preferred partner—that quote usually becomes leverage. The buyer brings it back to their existing supplier, who sharpens their pencil just enough to keep the business. The original distributor? They never see the order.
“If two people want to do business together, price is not going to be a problem. However, if one of the two doesn’t want to do business with the other, price is always going to be a problem.” – Jim Cathcart
What the Math Actually Says
Here’s where it gets real: If you’re a 30% margin company and give a 10% discount, you now need to increase your sales quantity by 50% just to earn the same profit.
That’s a massive lift.
It’s easy to say sales will go up.
It’s incredibly hard to increase sales by 50%.
To make the same $12,000 in gross profit, you now need to sell $150 worth of product at the new price.
So What’s the Better Approach?
Rather than broad, reactive discounting, consider this:
- Get strategic about who matters
Focus on key accounts, high-potential customers, and those willing to grow with you. - Understand what drives their behavior
Every buyer has a handful of products that drive their purchasing habits—high-volume, high-frequency, planned spend. Think “eggs, milk, and diapers.” Be sharp on those. - Avoid the trap of across-the-board cuts
Not all items need aggressive pricing. Lowering prices on less influential items won’t win you more business—it just erodes margin. - Use price as a scalpel, not a sledgehammer
Be competitive where it counts. Don’t slash where it doesn’t.
The Bottom Line
Yes, lowering price can increase sales. But if you’re not careful, you’ll sell more, work harder—and make less.
In most cases, especially with across-the-board cuts, price reductions are a shortcut to shrinking profits. The key is not to be the cheapest. The key is to be the smartest.
Pricing isn’t simple. And treating it like it is? That’s a myth that will cost you.