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What does pricing analysis involve for a small or mid-sized company?
Pricing analysis looks at how sales volumes and margins respond to price, costs, competitor prices, discounts and customer type. The aim is to find where price changes raise profit rather than just revenue. It combines historical data, margin calculations and, ideally, controlled tests to estimate how sensitive customers are.
Start by understanding margin per product after discounts, returns and delivery costs, since many firms discover that some customers or items lose money.
Next, estimate price sensitivity (elasticity) from past price changes, bearing in mind that promotions, seasonality and stock changes confuse the picture. Then test: change a price in some stores, regions or customer groups and compare against similar ones that stayed the same. Be careful with brand effects and with prices that customers compare easily.
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