# Price Elasticity

## Excel Price Elasticity for Sales and Marketing

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 Price Elasticity for Excel (by ModelSheet) employs scenarios for product pricing to analyze the impact of price changes on sales revenue and profit for multiple products that affect each other’s sales. The analysis of interrelated price elasticity between products is powerful for optimizing revenue and profit through informed pricing strategies. Price Elasticity for Excel analyzes pricing strategies and cost parameters to estimate the effect on unit sales, revenue and profit margins for the product range. The resulting analysis is useful for determining optimal prices for a product line with several products to maximize its revenue and/or profits. The elasticity analysis is flexible to accommodate propriety products, competitor products and substitutes that are not direct competitors. Furthermore, the Excel template can be customized to specific requirements online before downloading the purpose built solution. The estimation analysis accounts for both price elasticity for each product (price to sales volume) and cross elasticity between products (price to sales volume of other product). Both price elasticity and cross elasticity are assumed to be constant over the range of prices analyzed. Price Elasticity for Excel can calculate either constant price elasticity (direct relationship to sales volume) or generalized price elasticity (elasticity changes as a function of price). Key features of Price Elasticity for Excel include: Ability to define test markets (e.g. alternative locations) in order to test alternative prices to collect unit sales data for the analysis. Price sensitivity is estimated by analyzing price and sales units for the entire market that prevailed before the pricing test, the number of units sold in each test market before the pricing test, and the price and number of units sold in each test market during the test. Estimations are calculated for revenue, sales units and profit margin for the entire market at different prices that were tested. Standard statistical measures of goodness of fit of the analysis and the market test data are provided. Correlations of prices between each product are provided via the R squared statistic. A standard error of elasticity for each product and each pair of products is provided to determine the robustness of the analysis. Detailed information is provided on relationship factors to ensure that market tests yield valid conclusions about pricing behavior. A more basic version of Price Elasticity for Excel is also available for analyzing constant price elasticity for one product.

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