From the course: Data Analytics for Pricing Analysts in Excel (2018)

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Optimize pricing in business

Optimize pricing in business - Microsoft Excel Tutorial

From the course: Data Analytics for Pricing Analysts in Excel (2018)

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Optimize pricing in business

- [Instructor] The intersection of supply and demand tells us where firms set their price. But, it also helps us to understand profitability for the firm. In particular, we need to think not just about price for the firm or supply or demand, but cost as well. In the graph shown here, we've drawn cost as a blue line. The reality is that costs change, of course, for companies based on the number of products that they sell. In this case, just to keep things simple, we've kept that curve flat. Profit, then, is the difference between price and cost multiplied by the number of units sold. It's the box on the graph in front of you. Our goal in pricing analytics is to maximize that profit by changing price. How can we do that? Well, the answer is that in pricing, we're going to set our price to maximize margin, not sales. That's the number one thing that people get wrong when they first get started in business. They say well, I want to set my price so that I get as many customers as possible.…

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