Economic Modeling

Model your prices to predict specific volume, margin, and profit goals.

What if you lowered your price a penny? Focused on volumes for the day—not margins? Can you instantly model how that price change impacts volumes, margins, and profitability? What if you raised it two cents?

The PriceAdvantage Economic Modeling component provides forecast modeling that presents a recommended retail price calculated from the most relevant data points using best-in-class analytics. In addition, the tool allows you to create “what if” scenarios simply by adjusting the price by +/‐$.01 increments. It also provides you with a comprehensive pricing view that includes your current price alongside the suggested economic model, strategy, and competitor prices.

With PriceAdvantage Economic Modeling, you have the freedom to:

  • Model the price elasticity by store, commodity, day of week, and desired target volume, margin, and profit goals.

  • Input variable data to address seasonality considerations and market disruptions.

  • Optimize the balance of volume and/or margin based on statistically relevant elasticity and pre-defined constraints.

PriceAdvantageEconomicModel

Methodology

The model presents a range of prices in +/- $.01 increments. Bar charts plot the predicted volumes while a traversing line shows the predicted profit on each point on the curve, demonstrating how adjusting your price directly impacts both volume and profit. The model maps suggested prices based upon your unique pricing strategy and the economic model. It also suggests the profit maximization point within the curve.

The models are based on logistic multiple regressions and, secondarily, a correlation matrix based on historical identified competitor pricing. The variables in our economic model consist of the change in competitive price movement, competitive index, volume gallon sales for each commodity, and wholesale cost changes, date, date range, day of week, commodity pricing.  

“We used to spend a good part of the morning collecting surveys, inputting data into a spreadsheet and then submitting prices to the clubs. Now we are able to make price changes in under an hour, instantly receiving a confirmation that it has been completed, correctly.”

Scott Margherio
Scott Margherio,
Manager of Fuel and Automotive Operations, BJ’s Wholesale Club