Pricing Tests and Price Elasticity of Several Products
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| 11.07.2010, 10:09 |
| Challenge
#1: How do we set the price for a product line with several products to
maximize its revenue? |
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| This
application uses results of pricing tests to estimate impact of prices on
unit sales and revenue for several related products. The results can help you
optimize revenues with limited pricing experiments. |
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| The key to estimating sales from pricing tests is to estimate
the price elasticity for each product, and price cross-elasticities for each
pair of products from test results. The mathematics of price cross-elasticity
is described in the appendix below. |
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| The model computes revenue as sum(price[product] *
sales_units[product], product in product line) |
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| Challenge
#2: How do we set the price for a product line of several products to
maximize profits? |
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| The
Advanced version of the model computes profit margin as Revenue – Costs. Costs can be cost of goods
or total costs or whatever you choose, in order to compute gross margin,
operating margin or any other profit margin you choose. This model assigns
costs to each product, but costs can be joint costs of several products. |
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| The key
step in computing profit margins is to estimate costs as a function of unit
sales levels for the products, as described in the Technical Notes below. |
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| Категория: Модели для корпоративных финансов | Добавил: Den
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