Overview of Price Curves
Price curves enables the pricing of parts using a competitor margin. In the case that a part does not have competitive data, the competitive data of similar parts are grouped together and a price curve is developed for the group of parts. Once the price curve is established, the target price for any part can be calculated.
A price curve is established between the margin (y-axis) and natural log of the part cost (x-axis). This curve is developed by applying simple linear regression on the existing competitive price data. The price curve generates a logarithmic curve, but the equation is represented in linear form (y = mx + c) only, and a slope (m) and an intercept (c) are calculated.
Once the price curve is established, the price for any part can be derived from Target Margin using the following formulas:
Target Margin = m * ln(Cost) + c
(where m is the slope and c is the intercept for the cost curve)
Price = (1 / (1 - (m * ln(Cost) + c))) * Cost
(where Price = 1 / (1 - Target Margin) * Cost)
Follow these steps to use Price Curves:
1. Create price curves
2. Change price curve sequence
3. Process price curves
4. Review price curve processing results
5. Use price curves in pricing policies to price pairs
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The base setup right, Price Curve Maintenance, must be selected for the user to be able to view and/or modify price curves.
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