Worksheet: Teach the basics in one half-day

When pricing knowledge lives in one analyst, it leaves with them. This sheet runs a half-day for everyone who sets prices, promotions and markdowns. It rests on four sums they should be able to do on a napkin. It builds the Competent step of the check:

The people who set prices, promos and markdowns have been trained in the basics of elasticity and margin math.

Step 1. Who comes

Role	Number	Price, promotion or markdown decisions they make
e.g. Category managers	6	Shelf prices, promotion depth

Step 2. The four sums

Sum	Formula	Worked on the day
Margin and markup	Margin = (price − cost) ÷ price. Markup = (price − cost) ÷ cost.	e.g. Cost $6, price $10: margin 40%, markup 67%
Units needed to pay for a discount	Discount d, margin m: units must rise by d ÷ (m − d)	e.g. 20% off at 40% margin: units must double
Units you can lose on an increase	Increase p, margin m: you can lose p ÷ (m + p) of units	e.g. 5% up at 40% margin: can lose 11%
Elasticity	Unit change (%) ÷ price change (%)	e.g. Units down 6% on a 4% rise: -1.5

Step 3. The half-day

Module	What they do	Minutes
The four sums	Work each one on their own products	60
Reading elasticity	Look at one product's history and say how customers reacted	45
Framing	Compare two ways of showing the same price	30
One promotion, measured	Take last month's biggest promotion through baseline and breakeven	45

Step 4. The record

Name	Role	Attended	Can do the four sums unaided?

Done when: everyone who sets prices, promotions or markdowns has done the half-day, and can work the four sums on their own products.

Adapted from our own pricing overview session (Deloitte, 2015).