Margin Myth #1: “We’ll Make It Up in Volume”

“For every complex problem, there is an answer that is clear, simple, and wrong.” – H. L. Mencken

If you’ve spent any time in distribution, you’ve probably heard some version of this sentence in a meeting:

“Let’s cut the price. We’ll make it up in volume.”

It usually shows up after someone points out that sales have softened in a particular product line. The sales team reports that competitors are cheaper. Someone pulls up a few recent quotes that were lost. Heads nod around the table.

The conclusion starts to feel obvious: our prices must be too high.

Lower the matrix, get more competitive, and the volume will come back.

The reasoning feels logical in the moment. But pricing decisions made this way often create consequences no one expected.

A Real-World Example

I worked with a specialty distributor who learned this lesson the hard way.

About six months into the year, leadership began noticing a concerning dip in top-line revenue. The decline was easy to spot once they dug into the numbers.

Sales in their largest product family had dropped by roughly 16% compared to the previous year.

This product line represented a significant portion of the company’s business, so the drop immediately caught everyone’s attention.

Margins had held steady at roughly 35%, but the message from the field was consistent:

“Your pricing is too high.”

In response, leadership made a bold move. They lowered pricing on that major product family, cutting the general pricing matrix from roughly 35% margins down to 26.5%.

The goal was simple: regain lost sales.

What happened next surprised them.

Sales increased modestly — about 4.5%.

But gross profit dollars fell by roughly $15,000 per month.

They gained a little on the top line, but lost significantly on the bottom line.

Why This Belief Feels True

It’s easy to believe that if you lower prices, sales will increase. And sometimes they do.

But like many half-truths in business, the idea that lower prices automatically solve sales problems can be dangerously misleading.

Sales teams hear it constantly:

“Your price is too high.”

Over time, that repetition builds powerful cognitive bias.

• Recency bias — recent feedback carries more weight than older evidence.

• Confirmation bias — we interpret new information as proof of what we already believe.

• Availability bias — vivid examples are easier to remember than quiet outcomes.

One frustrated customer complaining about price is far more memorable than dozens of customers who bought without objection.

Over time, those memorable moments begin to shape the story people tell themselves about the market.

Eventually the narrative takes hold:

Sales must be down because prices are too high.

And if we just lower prices, the business will come back.

Why the Strategy Often Fails

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 consider things like:

• Inventory availability

• Delivery reliability

• Ease of doing business

• Invoicing and returns

• Relationships and trust

• Brand familiarity

• Risk of switching suppliers

Often when a distributor provides the lowest quote — but isn’t the preferred partner — the quote becomes leverage.

The buyer takes the quote back to their existing supplier, who sharpens their pencil just enough to keep the business.

The original distributor never sees the order.

As Jim Cathcart once said:

“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.”

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%.

There’s an old retail joke often attributed to Harry Gordon Selfridge.

A manager once proposed selling an item below cost and “making it up in volume.”

Selfridge reportedly replied:

“How do we make it up in volume?”

The point was simple: if you lose money on every sale, selling more units only increases the loss.

Where Lower Prices Do Make Sense

To be clear, this doesn’t mean prices should never move down.

Sometimes distributors are genuinely overpriced.

Markets change. Competitors enter aggressively. Commodity costs fall. New branches open in a territory and disrupt pricing.

I’ve seen cases where pricing matrices were initially set well above the market. Instead of improving profitability, it fractured trust with the sales team who were expected to rely on system pricing.

As Stephen M. R. Covey wrote in The Speed of Trust, low-trust environments create hidden costs in time, energy, and execution.

In situations like these, correcting prices downward isn’t reckless — it’s necessary.

The problem isn’t lowering prices.

The problem is lowering prices without understanding where price actually matters.

A Better Approach

Instead of broad, reactive discounting, successful distributors tend to approach pricing more deliberately.

They focus on the customers that matter most.

Key accounts and high-potential customers deserve thoughtful pricing strategies.

They understand which products actually drive buying behavior.

Every buyer has a handful of products that anchor their perception of price competitiveness — high-volume, high-frequency items that shape whether a supplier feels competitive.

Retailers sometimes call these known value items. Think eggs, milk, and diapers.

Parents with infants don’t track the price of every item in the store. But they know exactly what formula and diapers cost.

You could be 10% lower on most items in the store, but if you’re 5% higher on formula and diapers, you’re not winning their business.

The same dynamic exists in distribution.

Every customer has a small set of products that shape their perception of price competitiveness. Those are the items that matter most.

They segment instead of cutting across the board.

Not all products influence purchasing decisions equally. Lowering prices on less influential items rarely wins new business, it simply erodes margin.

In other words:

Use price like a scalpel, not a sledgehammer.

Be competitive where it matters. Protect margin where it doesn’t.

The Hidden Consequence

There’s another consequence that often follows moves like this.

Once prices drop, they’re incredibly hard to raise again. Sales teams quickly adjust their expectations, customers anchor on the new price, and competitors rarely stand still.

What started as a temporary attempt to regain sales quietly becomes the new normal.

The Operational Reality

Of course, pricing decisions inside distribution rarely happen in a vacuum.

Sales teams have relationships to manage. Competitors are quoting aggressively.

Branch managers are trying to protect their accounts.

In the real world, pricing decisions are rarely as simple as adjusting a number in a matrix.

They play out through people, negotiations, and competitive pressure in the field.

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 far too many cases, broad price reductions become a shortcut to shrinking profits.

The issue isn’t that prices should never move down.

The issue is when companies cut prices blindly — without understanding which products, customers, and situations actually drive demand.

Pricing isn’t simple.

And treating it like it is?

That’s a myth that quietly destroys profit.