If you're selling non-commodity goods your brand is an important reason why consumers purchase from you. If they realize product quality is going down they'll churn. You might have a short run of good profits, but eventually consumers will start purchasing something better, thus hurting your your total numbers.

Brand is more important for commodity goods than for non-commodities. It's the only distinguishing feature.

In this example, it states that because of this enployees were rewarded for reducing the unit cost of the product, which meant cutting in to quality. This led to sales declining because custoners were less interested in ab inferior product.

If management had looked less at the "how much profit can we squeeze out of 1 gallon" angle, and more "how much profit can we make overall", they might have made different decisions, such as preserving the quality of the product, they may have done better overall.

Unit profit is one factor in overall profit / revenue, but # of units solds is equally as important...it's a balancing act.

Having 100M revenue with 10% profit is better than 10M revenue with 20% profit.

Yes, as you can tell by the fact that your overall profit in the first scenario is $10M while in the second it is $2M. How is that an argument against overall profit?

I think it is an argument for overall profit which might come from focusing not on margin but on margin and volume.

You and also ChuckMcM were talking about unit profit.

My comment was only 18 words, but hey, here it is again:

> Why is overall revenue a better metric than unit profit? Wouldn't overall profit be the first-order effect?

If your product sucks, you'll sell fewer units (potentially).