How to use the clearance markdown schedule planner
- Enter the units in stock, your cost per unit, the current price and the number of units you sell a week now at that price.
- Enter a price sensitivity, which says how strongly sales respond to a lower price, and the lowest price you will accept in the last week.
- Enter the number of weeks you have to sell out.
- Read the smallest weekly markdown that clears the stock, the price and units for each week, and the revenue and profit.
Formula
price in week k = current price x (1 - step % x (k - 1) / 100)
weekly demand = weekly sales now x (price / current price)^(-sensitivity), rounded to a whole unit
units sold = min(units left, demand)
the step is the smallest multiple of 0.1% that sells all the stock within the weeks
Week 1 is at the current price, and each later week drops by the same percent of the current price. The lowest price in the last week cannot go below the floor you enter.
500 units in eight weeks
You hold 500 units that cost $12 and sell for $30, and you sell 40 a week now. With a price sensitivity of 1.5, a floor of $8 and eight weeks, the smallest weekly drop that clears the shelf is 6.4 percent of $30. Prices run $30.00, $28.08, $26.16, $24.24, $22.32, $20.40, $18.48 and $16.56.
Weekly sales are 40, 44, 49, 55, 62, 71, 83 and 96 units, which add up to 500. Revenue is $11,006.40 and profit after cost is $5,006.40. The lowest price, $16.56, is still above cost, so no week is sold below cost.
What price sensitivity means
The sensitivity, often called elasticity, is the exponent in the demand rule. At 1, a 10 percent price cut raises sales by about 11 percent. At 2, the same cut raises sales by about 23 percent. At 0.5 it raises them by only about 5 percent. It is an assumption, not a measurement.
If you have some sales history at different prices, the Price Elasticity of Demand Calculator can estimate it from two observations. Try a few values here to see how much the plan depends on the guess.
Using the schedule
Treat the schedule as a starting plan. Real sales also depend on the season, how visible the stock is and what competitors do, so compare each week's actual sales with the plan and adjust. The Sell-Through Rate Calculator measures what has sold so far, and the Maximum Discount for Target Margin Calculator shows how deep a cut can go before the margin disappears.
If no step can clear the stock before the price hits your floor, the page tells you so and suggests allowing more weeks, accepting a lower floor or checking the weekly sales you entered.
Assumptions and limits
- Sales follow a constant-sensitivity rule from the weekly sales and price you enter. Real demand is less regular.
- The markdown is the same percent of the current price each week, and the first week is at the current price.
- Units are whole numbers and weekly demand is rounded to the nearest unit.
- The step is searched in tenths of a percent, and the last week's price must be at least the floor you enter.
- Nothing typed here leaves your browser.
Frequently asked questions
Why does the page say no markdown is needed?
At the current price and weekly sales, the stock already sells out within your weeks. The schedule then shows week 1 at the current price and the weeks it takes.
What does the lowest price do?
It limits the search. The price in the last week cannot go below it, so the largest allowed weekly step is set by how far the price may fall over the weeks.
Why does the page ignore my cost?
Cost does not affect how much sells at each price in this model. It is used only to show profit and whether any week sells below cost.
Can I plan a markdown that is not the same every week?
Not on this page. It finds one even step. You can run it for part of the stock or part of the time, or adjust the weekly prices by hand from the table.