Optimal Selling Price Excel Model
  • Optimal Selling Price Excel Model
  • Optimal Selling Price Excel Model
Originally published: 31/01/2020 21:32
Publication number: ELQ-91687-1
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Optimal Selling Price Excel Model

Optimal Selling Price for Restaurants and the Retail Industry.

Description
The Optimal Selling Price template is an outstanding tool for maximizing profit contribution. The best selling price is determined with a simple test called the High Price/Low Price Test.

As an example: Say you want to offer a dinner special called Surf and Turf (Lobster and Steak-yum).

You are not sure if you should sell a lot of the specials with a lower cost or fewer with a higher cost.

For this we can do a test.

Step 1:
Sell the Special at a cost where you think you can sell a lot of specials with a relatively low profit margin on each sold. Record how many sales you did that day.

Step 2:
Sell the Special at a cost where you think is high, but won't turn away too many customers. You would sell fewer specials with a relatively high profit margin on each sold. Record how many sales you did that day.

First enter the preparation cost (or wholesale cost of retail item if you are in of the retail industry) into the template.

Now plug in the in the low price you tested with the amount you sold into the template. Do the same for the high price test as well.

The template will now display the best price to obtain the optimal profit margin. In the example shown, a low price of $19 and a high price of $39 was tested. The result was an estimated optimal selling price of $28. Please note that although the price of $21 brought in the most revenue, the profit margin was not as favorable as the $28 because you had to sell more with more cost to produce.

You are on your way to optimizing revenue!

This Best Practice includes
1 Excel Template

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  • Zak(last updated: 25/03/2020 20:18)
    One word - Excellent!
    Simply Excellent! helps me to understand elasticity, will continue to use more of Steve's amazing templates. Thanks, Steve!

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