Missing Price Targets

Businesses frequently set price goals. What does it mean not to hit them?

In A, we predict 1, the price of a barrel of oil. When the forecast date arises, the actual price, 2, varies, resulting in a one-dimension Error Line. We know by how much we missed, but nothing else.

B shows us what it means to be off-target in archery. If we aim at 1 and land on 2, we create an Error Triangle. That’s a two-dimensional error, in elevation (up and down) and azimuth (left to right).

In C, where every blue diamond stands for a business jet, we propose a new one. We set our target quantity and price, as 1, on the Demand Frontier, the line through the market’s outermost quantity-price points, in yellow. If we can’t put in enough features to support that price, we’d make a plane fetching less money, as 2. Moving from 1 to 2, we make a Demand Error Triangle.

But, in D, we find as prices fall, we might be able to sell more models. Analysts should find the Demand Frontier Slope to ascertain the amount of revenue available at market limits. That will be the areas under the curves, the green rectangle for 1, the orange one for 2.

What does it mean to miss price targets in Value Space? Find out in my next post.

#prices #demand #demandplanning #demandforecasting