Whats up with the revenue?

[Sqrl]

bdbdbd said:

TheRealMafoo said:

I am not a business guy, but I havm a few friends own some companies, and they are very concerned about revenue (in some cases, more than profit).

Selling 100,000 things that make you $10 each is far better than selling 10,000 things that make you $100 each.

I am not sure why. Maybe a business guy could chime in and explain it.

 

I'm not a businessguy myself, but i do understand the reason.

Your friends are concerned about revenue, because it shows the value of your market. Without market, no profit.
If you have high revenue, but low profit, you can increase your profit by cutting down costs.

High sales volume, compared to low volume, cuts costs per unit sold. Production usually gets cheaper as volume grows, as well as logistics. Also, in your example, the cheaper product has larger market, which means that demand doesn't jump up and down that much, as it does with expensive low volume products.
Think it this way, that your truck/van can take 10 units of the item you're selling. Since you have to pay for the driver and you have to pay the diesel, one truckload increases costs by 100€. So, it would increase the price by 10€/unit, or eat away your profit by 10€/unit.
Then you have another product, which you can fit 100 units to one truckload, costs are the same, so the price increases by 1€/unit.
And the same goes for retail, low volume equals higher costs/slower returns for their investments etc.

Although your question was purely hypothetical (the two products would have to be completely different, when the competition aspect would be different too), the whole process is a little too complicated to explain (atleast for me in english), but the generalisations i made should work as an example.

Aah first good reasoning I've seen. +10.

I definitely see the value in that from the businesses perspective...but I'm curious if you see any value in discussing revenue for VGC users considering we lack the rest of the information that a strategists would use to monitor the things you pointed out.

I think what I'm saying is that I definitely agree revenue isn't a throwaway number from an internal businesses standpoint in terms of monitoring your strategic position in the market. I'm just not seeing what it has to do with the discussions about "Which console will [game] come out on?", "Will the Wii/PS3/360 get more 3rd Party Support this generation?", etc....

edit:

@therealmafoo,

I actually made a very similar example in my OP =P  So, yes, I agree lol =)