Method for determining retail unit specific price sensitivities

Abstract

A method of determining a price sensitivity index for one or more retail units is based on the relation between profits, sales or traffic and a fixed weight price index based on information from individual retail units. Statistical regression and the theory of the single-product firm is used to analyze the relation between changes in performance variables and changes in the price index, leading to a unit-specific index of sensitivity. This information allows stores to be sorted into those which can see price aggression, those which cannot, and those which are likely to respond to promotions.

What is claimed is:  
     
         1 . A method of determining a price sensitivity for one or more retail units comprising: 
 a) creating a fixed weight price index based on pricing information from each retail unit, wherein the index varies only when prices vary and the weights are based on an average menu mix per retail unit over a select period of time;    b) regressing at least one of profits or sales or quantity sold for the retail unit on the fixed weight price index over a select period of time, and producing a regression coefficient for the fixed weight price index, wherein time differences in profits/sales and time differences in the price index are used as the independent variables in the regression analysis and the variable regressed is the time differences in quantity sold and gross profit; and    c) assigning a price sensitivity indicator based on the magnitude of the regression coefficient, wherein the magnitude of the indicator reflects the level of price sensitivity of the retail unit as it relates to the regressed variable.    
     
     
         2 . The method of  claim 1 , wherein each of profits or sales and quantity sold are regressed, and the indicator for profits/sales shows how the store compares to an optimum pricing index, and the indicator for quantity sold shows how sensitive the store is to price changes.  
     
     
         3 . The method of  claim 1 , wherein price sensitivity indicators for profits/sales include high, low, and right.  
     
     
         4 . The method of  claim 1 , wherein price sensitivity indicators for quantity sold include not sensitive, sensitive, and highly sensitive.  
     
     
         5 . The method of  claim 1 , wherein the time difference is one of a year to year time difference, a week to an adjacent week time difference, a day to an adjacent day, or a month to an adjacent month.  
     
     
         6 . The method of  claim 1 , where the time difference is based on a year to year time difference.  
     
     
         7 . The method of  claim 1 , wherein a log of the profits or sales or quantity sold for the retail unit are regressed on a log of the fixed weight price index.  
     
     
         8 . A method of determining a price sensitivity of one or more retail units comprising: 
 identifying a weighted price index for each retail unit for a period of time;    regressing gross profits of the retail unit on the weighted price index to determine where the weighted price index falls with respect to the gross profit function in order to ascertain a magnitude of price sensitivity against gross profit for the retail unit.    
     
     
         9 . A method of determining a price sensitivity of one or more retail units comprising: 
 identifying a weighted price index for each retail unit for a period of time;    regressing quantity of items sold for the retail unit on the weighted price index to determine where the weighted price index falls with respect to the quantity sold in order to ascertain a magnitude of price sensitivity against quantity of items sold for the retail unit.    
     
     
         10 . A method of  claim 9 , further comprising regressing quantity of items sold for the retail unit on the weighted price index to determine where the weighted price index falls with respect to the quantity sold in order to ascertain a magnitude of price sensitivity against quantity of items sold for the retail unit.  
     
     
         11 . The method of  claim 9 , further comprising assigning a gross profit indicator to reflect where the weighted price index falls with respect to the gross profit.  
     
     
         12 . The method of  claim 9 , further comprising assigning a sensitivity indicator to reflect where the weighted price index falls with respect to the quantity of items sold.  
     
     
         13 . The method of  claim 9 , wherein the period of time is a year to year time period, and the regression is based on the year to year differences in the weighted price index.  
     
     
         14 . The method of  claim 10 , further comprising assigning a gross profit indicator to reflect where the weighted price index falls with respect to the gross profit.  
     
     
         15 . The method of  claim 10 , further comprising assigning a sensitivity indicator to reflect where the weighted price index falls with respect to the quantity of items sold  
     
     
         16 . The method of  claim 10 , wherein the period of time is a year to year time period, and the regression is based on the year to year differences in the weighted price index  
     
     
         17 . The method of  claim 11 , wherein the period of time is a year to year time period, and the regression is based on the year to year differences in the weighted price index  
     
     
         18 . The method of  claim 12 , wherein the period of time is a year to year time period, and the regression is based on the year to year differences in the weighted price index