Application Features

The 'What If' menu item pricing is an extension of the Price Point analysis, except that it considers the concept of menu item cannibalization purchases. There will always be some point in which the volume of sales will be cannibalized from the regular menu price based on the discounted promotional menu items at a lower price point. This feature allows you to estimate the amount of regular priced purchases that will 'disappear' and become LSM promo generated sales. In this respect, the modal assumes that some number (volume) of items will be purchased at the lower price, but the promotional priced menu item will generate more sales volume. Take into consideration the following example:

One of the assumptions of the 'What if' scenario is that the number of 'normal' menu item sales will decrease because of the promotion. This is not necessarily the case, depending on the LSM plan, but that is the working assumption under this analysis. The regular priced 'volume' of sales will decrease because of the promotion as customers realize the value of your LSM plan and order accordingly. Again, the power of volume intercedes in the equation for profit as shown below.

What is clear is that the number of units sold prior to the promotion was 100 - although 20 units were cannibalized, 50 new units were sold at the promotional price for a total of 130, which increased net sales by almost $300 and profit by $180.