Pricing Competitor Response Simulator

Competitor Price Response

Case Study

A PE firm evaluating an investment in an IT services company wanted to assess the impact of management’s proposed product pricing changes on the company and the broader industry. Our client, the PE firm, believed that the IT services company had not adequately factored in their competitors’ response to the proposed price changes.

Solution:

• Predict the expected price response by competitors and the associated impact on demand by implementing price elasticity models
• Factor in market research and data from a proprietary survey to build a granular model for the IT services industry
• Combine an Excel interface with statistical tools such as R

Benefits:

• Gauge impact on enterprise value through understanding changes in revenue and profitability of proposed pricing changes
• Utilize the resulting scenarios and results to stimulate a discussion with the management team