This tool is used to analyze sales results by comparing the sales data of a product and/or service sold at 2 different prices. This can be useful when a business is investigating the best price points of their products/services to achieve the highest Net Margin.
The user simply enters the selling prices and the number of “Items” sold at a lower and higher price, and the cost to produce the product and/or service. Based on the information entered, formulas will calculate an expected price for both a Maximised Margin and a Maximised Revenue.
Next, the user can enter a Proposed Price, which will then give the quantity to sell, Gross Revenue, and Net Margin of their suggested price.
Depending on Demand Elasticity (the effect of any loss of demand due to a higher price), the tables and charts then illustrate why striving for higher total Gross Revenue may actually be harming your bottom line Net Margin.