Pricing Products and Services for Profitability
Profit depends on realized price and incremental variable costs.
Cheat sheet
Profit depends on realized price and incremental variable costs.
What to check first
Calculate unit contribution using net revenue and include refunds or rework where relevant.
How to make the call
Check whether staffing can handle the volume and test geographic clustering to lower travel cost.
OpenStax · Pricing products and services · further reading for pricing & product
Indian practice case
Fictional scenario
A Hyderabad appliance service charges ₹600. Technician pay is ₹250, travel ₹100 and parts ₹70. Fixed costs are ₹90,000 per month.
Reveal the step-by-step solution
- Diagnose the problem.
Calculate unit contribution using net revenue and include refunds or rework where relevant.
- Work through the evidence.
Contribution is ₹180 per job. Break-even requires 500 jobs per month.
- Recommend and validate.
Check whether staffing can handle the volume and test geographic clustering to lower travel cost.
More Indian cases
Interview question
How would you use pricing products and services for profitability to make the decision in this case? Explain which data you need first and what would change your recommendation.
See what a strong answer includes
Contribution is ₹180 per job. Break-even requires 500 jobs per month. Check whether staffing can handle the volume and test geographic clustering to lower travel cost.