Expanded - Lift Analysis - Article 2: Structuring Effective SPAs: Mechanics and Calculations

Chapter 3: SPAs - Special Purchase Agreements: Enhancing Pricing Flexibility

This is an expansion on Lift Analysis. How to calculate, with formulas and expanded details.

Lift Analysis:

Lift analysis is a valuable technique used in pricing strategies to measure the impact of discounts or promotions on sales. It helps determine the additional sales volume needed to offset the discount and maintain the same profit level or achieve a desired profit increase.

Step 1: Define the baseline scenario:

Identify the baseline sales volume, profit per unit, and total profit from the baseline sale.

Step 2: Calculate the profit per unit with the discount:

Determine the profit per unit when the discount is applied. This is the profit per unit under the special pricing agreement.

Step 3: Calculate the break-even volume on profit:

Divide the total profit from the baseline sale by the profit per unit with the discount to find the break-even volume on profit.

Step 4: Evaluate the additional units needed:

Compare the break-even volume on profit with the baseline sales volume to determine the additional units needed to maintain the same profit level or achieve the desired profit increase.