Multiple Product Pricing

1. Minimum Operating Revenue (MOR)

2. Time, Price, Volume

Multiple Product pricing is dependent on two factors:

1. Create Revenue;

2. Improve Revenue;

3. Support Revenue Production;

4. Manage Cash Reserves;

5. Address Challenges

Minimum Operating Revenue (MOR) is the revenue you need to create to pay for Operating Plans; plans to:

MOR is a calculated number based on the resources you have available. It is not a Break-even number but an amount that will include a Net Profit from Operations as well as an amount that will include an increase in cash reserves. Refer to the booklet Planning for & Estimating Revenue for calculating details.

Do you have the time to sell the required volume of units at a defined price to meet revenue requirements?

Time, Volume, & Price

Refer to the booklet Planning for & Estimating Revenue for details on determining time (to sell).

Divide Products into categories that reflect the nature of the grouping. The final product grouping should all have the same selling cost structure. For example:

• If you are selling clothing you may have three primary categories: Shirts, Pants, and Accessories. The shirt category may have: short sleeve and long sleeve; then Short Sleeve Cotton and Short Sleeve Polyester.

• The final category – Short Sleeve Cotton – will have two styles with the same cost structure..

Step 1

Cost structure is very important. Refer to the booklet Planning for & Estimating Revenue for details.

Estimate a Revenue Mix (RM%) for each category.

Step 2

RM% = a percentage estimate of the revenue each category will contribute to the total revenue.

MOR for the total product group (Row 2) has been predetermined using a revenue estimating formula. RM% defines the Revenue for each category

We start with the full line of product (Rows 4-6); then move to a single product category (Shirts Rows 8-12).

Then to a specific shirt types: Short Sleeve Cotton; Short Sleeve Polyester (Rows 15-18).

Finally to Short Sleeve Cotton and two styles.

Note that each time we drill down into the category, we carry forward a MOR number from the previous worksheet.

Step 2 Worksheet

Do you have the time to sell the required number of units to meet revenue requirements?

Step 3 Feasibility Question

Minimum Operating Revenue (MOR) is not an arbitrary number nor is it a number determined by volume. Just the opposite; MOR is calculated using a revenue estimating formula that sets the base for volume. Refer to the booklet Planning for & Estimating Revenue for more details.