How can you forecast the impact of a pricing strategy change on your business?

2 Build a baseline model

The next step is to build a baseline model that reflects your current situation and performance. A baseline model is a spreadsheet or software tool that calculates your revenue, costs, and profits based on your current pricing and other variables. You can use historical data or averages to populate your baseline model, or you can use more sophisticated methods such as regression analysis or machine learning to estimate the relationships between variables. A baseline model helps you understand how your business operates and how sensitive it is to changes in pricing and other factors.

3 Create alternative scenarios

The third step is to create alternative scenarios that represent different pricing strategies and outcomes. A scenario is a set of assumptions and inputs that you can apply to your baseline model to see how they affect your KPIs. For example, you can create a scenario that increases your price by 10%, and another scenario that decreases it by 5%. You can also create scenarios that reflect changes in demand, costs, or competition. You can use simple formulas or functions to adjust your inputs, or you can use more advanced techniques such as sensitivity analysis or Monte Carlo simulation to account for uncertainty and variability.

4 Compare and evaluate scenarios

The fourth step is to compare and evaluate the scenarios that you have created. You can use charts, tables, or dashboards to display and compare the results of each scenario on your KPIs. You can also use metrics such as net present value (NPV), internal rate of return (IRR), or break-even point to assess the profitability and feasibility of each scenario. You can use criteria such as risk, return, alignment with objectives, or customer feedback to rank and select the best scenario for your business.

5 Test and refine your forecast

The fifth step is to test and refine your forecast based on feedback and data. You can use techniques such as split testing, pilot testing, or market testing to experiment with different pricing strategies and collect real-world data on customer behavior and response. You can also use tools such as surveys, interviews, or focus groups to gather qualitative feedback and insights from your customers and stakeholders. You can use the feedback and data to validate or adjust your assumptions and inputs, and to update your model and scenarios accordingly.

6 Implement and monitor your pricing strategy

The final step is to implement and monitor your pricing strategy based on your forecast. You can use a project plan or a roadmap to outline the steps, resources, and timelines for executing your pricing strategy. You can also use a communication plan or a change management plan to inform and engage your customers, employees, and partners about the pricing change and its benefits. You can use a performance dashboard or a reporting system to track and measure the actual results of your pricing strategy against your forecast and KPIs. You can use the data and feedback to evaluate and improve your pricing strategy over time.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?