Pricing Analytics PPT: Find the optimal price of your product

Estimating Demand Curves Without Price Elasticity to determine the optimal price that maximizes your profit margin.

by Michael Lamont
CTO at Process SoftwareFollow 11

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Description
The most common way of constructing demand curves depends on the product’s price elasticity. But what if that input is not available, or the figures cannot be obtained for a given product?

Another way to do this is by making reasonable estimates of the demand for a product at its high, median and low price points, which then allows you to construct an estimate of the demand curve over the range of those given prices.

The following downloadable presentation shows how you can use Excel’s line fitting and solver functionality to construct an estimate of the demand curve, without having to know the price elasticity of the product at hand.

This will allow you to determine the optimal price for the product, which will maximize your profit margin.

The attached PDF Document includes 33 slides which you can use as a support to the YouTube video attached.

Notes:

-> Best price – price that yields max profits, not necessarily max
unit sales
-> Excel’s Solver tool can be used to construct useful pricing
models

Solver tries all reasonable solutions that fit the specified model
-> Chooses optimal solution – values for variable cells that
produce best value for target cell

- Michael Lamont

This Best Practice includes
1 PDF File + 1 video