Estimating Sales at Different Prices

The probability of significant sales volume differences at different prices depends upon the price elasticity of the market and number of similar competitors.

First, you'll determine how many similar direct competitors you have and their pricing differences. Perceived value is also important in many categories. Strict price per unit or ounce comparisons may not be meaningful to buyers, if they perceive that one product is of much higher quality than another.

Second, determine price elasticity, or "price sensitivity" for the market. If you have a price-sensitive category and large volume differences occur at various price differences with products on sale, it still may be difficult to accurately measure price versus volume differentials since other factors may also come into play.

The length of time various brands have been on the market, their relative market share, brand loyalty factors, advertising and promotion spending levels, sales support, merchandising efforts, distribution penetration levels/market all have an influence on the pricing versus volume equation.

In addition, internal company objectives need to be addressed:

• cost of goods
• marketing spending
• overhead
• sales commissions
• distributor markups
• shipping costs to distributors
• profit objectives

Pricing at different levels to generate different volume levels may not address benchmark company objectives. Pricing must cover all costs, spending, and margin objectives.