Solve Profit First

Suppliers make products and see what markets will bear for them.  That’s precisely backward.

Instead, we can solve for profit potential first and discover product specifications second.

Suppose a market has products for which there are particular quantities, and prices demanded, as shown by the red dots.  We want to avoid competition, so we choose a Target Price, 1, that exploits a price gap.  Given a Demand Frontier, this sets a quantity limit, 2.

With some work (not shown), we find the market supports Features A & B with a green Value Surface (supportable prices based on those features), and that there’s an area of interest with no competition.  Linked to that region are the costs for 1 and 200 units of our new product.  If we constrain the problem (orange planes), we form an enclosure.

We then run Financial Catscans through this region.  Much like brain scans, they are virtual market section cuts.  At the optimum, we solve for the specs of Features A (3) and B (4), and the per-unit profit (5).  Per unit profit (5) times the demand limit quantity (2) yields max potential profit.

In the process, we’ve solved a 4D problem (Feature A, Feature B, Price, Quantity) from a 1D goal (profit).

#innovation #price #value #markets #profit #sales #manangement