Two Cool Tools for Pricing Research
Versta Research has just published is spring 2014 newsletter which features a short video on how to do pricing research. If you ever work with price and demand data, and need to figure out the optimal price for your product or service, here are two great tools worth knowing about:
1. PowerPoint (yes, that says PowerPoint)
Each offers powerful statistical capabilities that will help you plot and find the optimal price point on a demand curve.
First, use PowerPoint to find the best-fit curve for your data. It’s very cool. You don’t need formulas. You just point and click and interact with the data. It will give you the best-fit linear regression equation (the typical demand curve used in most economic analysis) or the best-fit equation for a power curve with constant elasticity.
Second, use R to find the point on your demand curve that optimizes revenue. It has an optimize function built into its (free) statistical package. Just pull in the linear equation from your PowerPoint chart, transform that into the function you want to optimize, and voilà, R finds the price at which total revenue is highest.
Curious? Watch this video on finding the best price for your product (hint: you will probably want to click on the settings icon at the bottom, and set your viewing to HD):
And take a look at our spring 2014 newsletter, Finding the Best Price for Your Product, for other research ideas and news.