Pricing Software 

Your pricing strategy should be to determine at which price do you obtain the maximum profit (margin times volume less fixed costs). You can price it high and receive a high margin, but your volume would be relatively low. Or you could price it low, with a low margin , but high volume. The question is what is the optimum price that would deliver a estimated volume that would result in maximum profit.

In the first part of this pricing software "what if" model, you insert your range of fixed costs. The second part, a sample of which is shown below,  is on the selection of the selling price. The variables are estimated high/low variable costs and selling price/estimated sales. What you are looking for here is the price that will give you the highest total marginal income. Total marginal income is the marginal income per unit (selling price minus variable cost) times estimated sales. In this sample, the optimum selling price is $2100. 

Sample of Selection of Selling Price on Chart in Model

Shown below are two graphs in the model that automatically illustrate the numbers you insert in the chart above. The first shows the relationship you choose between selling price and estimated resulting volume. This line is normally a relatively smooth curve, with the curve being close to the horizontal for products/ services that are insensitive to price (example medicine or Scotch) and more vertical when they are sensitive (example paper napkins, towels, etc.).

Sample of Price/Volume Relationship on Graph in Model 

The second one, below, depicts the total marginal income for both high and low variable costs. If you don't like what you see in these two graphs, or they don't appear to be realistic, you go back and keep making changes in the chart. That is why it is called a "what if" model.

Sample of Total Marginal Income at Selected Selling Prices on Graph in Model 

The third part of the pricing software model determines the high and low marginal income on both a unit and a percentage basis. The two variables are the high and low sales price. Normally you take the optimum price arrived at in the chart above as your high price and the next lower price in your scale as the estimated low price (the trade or customer will probably always beat you down in price).

Now that you have our high and low marginal income, the model will determine your breakeven points, which is the fourth part of the model. The fifth part of the model calculates your net income and the sixth and last part calculates your discounted cash flow.

The model contains both a case history section, which you can examine to see how the model works, and a section in which you can insert your own data. The model also contains a help section.

This is one of five models in this marketing software package. To view the others, click on "return to main menu" below. The complete package is only $29.95.

If you need any help in developing your plans, please e-mail wml@wml-marketing.com

Also, why not take a look at our Strategic Marketing Plan software model. Just click on Strategic Marketing Plan Software. 

(Click on appropriate selection)
Return to Main Menu

All software will be e-mailed to you