Price Elasticity Estimator

Overview

Price Elasticity Estimator quantifies the relationship between price changes and demand response for CPG and retail products. It computes own-price elasticity coefficients, models cross-price effects, and simulates the revenue and margin impact of proposed price changes. This enables data-driven pricing decisions that balance volume, revenue, and margin objectives.

Price elasticity is the single most important input to pricing strategy. A product with elasticity of −2.0 will lose 10% of volume for every 5% price increase; knowing this allows precise trade-off analysis. In CPG, typical own-price elasticities range from −1.5 to −3.5, varying significantly by category, brand equity, competitive set, and channel.

When to Use

• Evaluating the impact of a proposed price increase or decrease
• Annual pricing review or cost-driven price adjustment planning
• Competitive response analysis — "if competitor drops price by 10%, what happens to our volume?"
• Promotion depth optimization — determining optimal temporary price reduction
• Private label pricing strategy relative to national brands
• Building pricing architecture (good/better/best tiering)
• User provides historical price and volume data and asks about price sensitivity

Required Inputs