Price Elasticity of Demand: A Key Influencer of Pricing Strategies
Determining the right price for your products and services is not a simple task. In fact, setting the right price for a service/product is one of the toughest tasks assigned to a marketer. This is because it directly impacts the organization’s bottom line. One of the crucial elements associated with pricing is what economists refer to as ‘Price Elasticity’.
Price elasticity is a part of a price analytics study and an important concept for players across industries as it is a key influencer of the price charged for their products and services. Businesses today are increasingly being forced to closely monitor how changes in pricing affect their overall market demand. By doing so, companies can develop pricing strategies to improve revenue structures and drive organizational growth.
Today, leading equipment rental companies are increasingly seeking to differentiate themselves based on product pricing. Are you one of them? Get in touch to know how price elasticity analysis can influence your pricing decisions.
The client is a renowned heavy equipment rental company located in the US.
Project Background and Solution Offered
The client, a renowned heavy equipment rental company extensively relied on manual approaches to determine the price elasticity of demand. The process was cumbersome and not scalable due to which the equipment rental company ended up making several inefficient pricing decisions in the past. To overcome such pricing issues the equipment rental company was on the look-out for a prescriptive and analytical solution to streamline their pricing decisions. The solutions offered were obtained by leveraging the equipment rental firm’s historical pricing data in order to recommend an optimal rental price based on customer behavior.
Value Delivered to the Client
Quantzig’s approach to addressing the heavy equipment rental company’s concerns started with the development of price elasticity of demand graph to draw insights on the price recommendations. Our price analytics experts offered a one-stop solution that enabled them to expand the use of analytics beyond pricing strategies leading to the development of a price elasticity formula.
The solutions and recommendations offered also enabled the client to improve compliance associated with pricing, thereby minimizing the time taken for the end-to-end deal creation process by about 50%. This ultimately resulted in an incremental revenue gain of 10%.