The good news is that you don't have to be the cheapest
Posted: Thu May 22, 2025 9:29 am
In the market to benefit from pricing based on price elasticity of demand.
In our experience, the optimal price (where the profit margin is highest) is often actually much higher than the starting price, meaning many companies are effectively losing profits.
Myth #2: The more you lower your prices, the more demand there will be for your products.
Lowering the price of a product often leads to increased demand, but not always. There are a few (surprisingly common) scenarios in which this logic fails miserably:
Sometimes, if you lower the price of a product too kazakhstan phone number list much, people may become suspicious and start to doubt the quality of the product, and therefore demand may fall (for example, if a $1,000 iPhone is sold for $500).
You may run out of stock faster than expected, in which case increased demand will not help.
You've already covered the entire market (or a large enough portion of it), which means that lowering your prices won't help you attract new customers - because there are no potential customers left in the market.
In some cases, no matter how much you lower your prices, your competitors will match your price while the market size remains the same - and you'll be left with a lower profit margin and nothing more.
Myth #3: Price elasticity is something intangible and unscientific that cannot be tested.
Wrong! Price elasticity of demand is not just a gut feeling that you could set your prices higher, it can actually be calculated and tested in a very precise way that will help you as a seller find the optimal price for each product.
In mathematical terms, price elasticity of demand can be calculated in several different ways.
One way to calculate this is to divide the percentage change in quantity required by the percentage change in price.
Let's say you sell shirts online for 1,000 rubles each, and you currently sell 500 shirts per day. You decide to increase your selling price by 12.5%, which comes out to 1,125 rubles per shirt. Because of the price increase, sales have dropped from 500 shirts sold each day to 400 shirts, a 20% decrease.
In our experience, the optimal price (where the profit margin is highest) is often actually much higher than the starting price, meaning many companies are effectively losing profits.
Myth #2: The more you lower your prices, the more demand there will be for your products.
Lowering the price of a product often leads to increased demand, but not always. There are a few (surprisingly common) scenarios in which this logic fails miserably:
Sometimes, if you lower the price of a product too kazakhstan phone number list much, people may become suspicious and start to doubt the quality of the product, and therefore demand may fall (for example, if a $1,000 iPhone is sold for $500).
You may run out of stock faster than expected, in which case increased demand will not help.
You've already covered the entire market (or a large enough portion of it), which means that lowering your prices won't help you attract new customers - because there are no potential customers left in the market.
In some cases, no matter how much you lower your prices, your competitors will match your price while the market size remains the same - and you'll be left with a lower profit margin and nothing more.
Myth #3: Price elasticity is something intangible and unscientific that cannot be tested.
Wrong! Price elasticity of demand is not just a gut feeling that you could set your prices higher, it can actually be calculated and tested in a very precise way that will help you as a seller find the optimal price for each product.
In mathematical terms, price elasticity of demand can be calculated in several different ways.
One way to calculate this is to divide the percentage change in quantity required by the percentage change in price.
Let's say you sell shirts online for 1,000 rubles each, and you currently sell 500 shirts per day. You decide to increase your selling price by 12.5%, which comes out to 1,125 rubles per shirt. Because of the price increase, sales have dropped from 500 shirts sold each day to 400 shirts, a 20% decrease.