Price Elasticity - Ritvvij Parrikh Price Elasticity | Ritvvij Parrikh Humane ClubMade in Humane Club

Price Elasticity

Price elasticity is the percent change in quantity of product sold divided by the percent change in price. This number is always a negative number.

  • Elasticity is inelastic, i.e. between 0 to -1. You’ll make more money by raising the price
  • Elasticity is elastic, i.e., less than -1. You’ll make more money by dropping price.

There are several factors

  • How loyal is the user to your Owned Identity
  • Number of substitutes in the market
  • What is your Competitive Differentiation? For example, are there any Owned Network or Switching Costs moats?

Complications. There isn’t a meaningful way to do user research to determine price elasticity. Instead you should do A/B Testing to evaluate how users are responding while keeping in mind:

  • Different customer segments can have different price elasticity.
  • Seasonality can also influence the results.

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