Price elasticities
The aim of price elasticity analysis is to find out how sensitively demand for certain products or services reacts to price changes. (e.g. as a result of a tax increase). Percentage values for both the price change and the demand change are determined and compared.
Questions that our customers ask themselves:
- What effect would a price increase of my product have on demand?
- How much will the demand for my product change if an expected tax increase is implemented?
what you get
Evidence-based results on the impact of price changes on sales, turnover and profit of individual products
Exemplary results:
- A price increase of 2% reduces the demand for my product by 1.6%
- To maximise profit, there should be a price increase of 5%
Intrinsic and cross-elasticities, explaining the correlations between price changes on one's own as well as other products
Our approach
Step 01
Create a market overview
Identification of all product groups under consideration and evaluation of historical price and demand developments. Comparison of prices or price structures and demand volumes in different markets.
Step 02
Estimation of price elasticities of demand
Regular sales figures of products under consideration are used to determine the relationship between price and demand. For example, a log-log model is estimated to determine own and cross-price elasticities.
Step 03
Evaluation of results by means of scenario analysis
The determined elasticity matrix is used to evaluate and compare the effects of different price adjustments (scenarios) on the price and quantity sold.