Model pricing strategies with cost-plus, value-based, and competitive pricing analysis including elasticity and revenue optimization.
This tool turns a price decision into three separate calculations: a cost-plus floor (the price that covers cost and hits a target margin), a value-based ceiling (what customers would pay for the value delivered), and a competitive check (how your price sits against rivals). It then runs an elasticity model that projects how volume and revenue move if you change the price. The most common mistake is treating markup and margin as the same number: a 40 percent margin is not a 40 percent markup, and the difference changes the price you set.
A concrete input and expected output from the current implementation.
Input
Unit cost: $10.00 | Target margin on price: 40% | Current price: $20.00 | Monthly volume: 1,000 | Elasticity: -1.5 | Proposed price: $22.00 | Main competitor: $18.00
Expected output
Cost-plus floor: $16.67. Proposed $22.00 clears it. Competitive check: $22.00 is a 22.2% premium over the $18.00 leader. Elasticity projection: +10% price, -15% volume to 850 units; revenue falls from $20,000 to $18,700 (-6.5%); unit margin at $22.00 rises to 54.5%.
At elasticity -1.5 demand is elastic, so the 10% price rise sheds 15% of volume and revenue falls $1,300. The floor and the projection answer different questions, which is why both appear: $16.67 guarantees the margin, but the market response, not the cost, decides whether $22.00 works.
Cost-plus starts from unit cost and a target percentage, but the percentage has two conventions. Margin on price solves price = cost / (1 - margin): on a $10 cost, 40% margin gives $16.67. Markup on cost solves price = cost x (1 + markup): the same 40% gives $14.00, which is only a 28.6% margin. State which convention your input uses, because the two floors differ.
The elasticity module projects the effect of a price change using the standard relationship: percent change in volume equals the entered elasticity times the percent change in price. From $20 to $22, a 10% rise with elasticity -1.5 cuts volume 15%, from 1,000 to 850. It reports the new volume, revenue before and after, and the difference, which shows whether a change pays for itself before competitors react.
No. Margin is profit as a share of the selling price; markup is profit as a share of cost. On a $10 cost, 40% markup gives $14.00, which is a 28.6% margin, while a true 40% margin needs $16.67. Use whichever convention your contract or category standard states, and check which one your input expressed.
Matching a competitor tells you where you sit, not what happens when you move. Elasticity projects the volume and revenue effect of the change itself, which is exactly what a competitor comparison cannot show. The tool keeps the two separate, because a price can be right on the index and still be a bad move if demand is elastic.
The example and behavioral notes were checked against the browser implementation. Standards and primary references below define the relevant format, formula, or platform behavior.
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