Template Purpose
Use this template to model price decisions with volume elasticity, contribution margin, and demand substitution effects before release into production.
- Prioritize high-revenue SKUs where small price errors create outsized margin impact.
- Quantify base case, upside case, and downside case before any price rollout.
- Separate revenue growth from profitable growth by tracking margin contribution.
Required Inputs
- Commercial: current price, target price range, baseline units, promo calendar.
- Financial: unit cost, variable fulfillment cost, markdown rate, return rate.
- Behavioral: estimated elasticity band, substitution probability, competitor gap.
- Constraints: legal price rules, regional policies, and channel differences.
Decision Matrix
Score each scenario before launch:
- Green: margin dollars increase and unit decline remains inside tolerance.
- Yellow: margin improves but conversion risk is high; run controlled holdout test.
- Red: margin and volume both deteriorate; reject and redesign offer mechanics.
Post-Launch Guardrails
- Monitor conversion, margin, and return rate within 24 hours of rollout.
- Define rollback triggers for sudden conversion loss by segment.
- Review true elasticity weekly and recalibrate scenario assumptions monthly.
FAQ
- How large should a price test be?
Start with a controlled segment of 5 to 15 percent of relevant traffic or stores so you can detect impact without broad downside risk.
- What is the minimum KPI set?
Track conversion, margin dollars, unit volume, and return rate together. Single-metric pricing decisions are usually misleading.
- How often should elasticity be recalculated?
Recalculate weekly during active experiments and at least monthly once pricing behavior stabilizes.