But the phenomenon is more quantifiable than that, and price elasticity shows exactly how responsive customer demand is for a product based on its price. Most customers in most markets are sensitive to the price of a product or service, and the assumption is that more people will buy the product or service if it’s cheaper and less will buy it if it’s more expensive. To better understand this concept and how it impacts marketing, I talked with Jill Avery, a senior lecturer at Harvard Business School and an author of HBR’s Go To Market Tools.
One of the critical elements of pricing is understanding what economists call price elasticity. In fact, determining price is one of the toughest things a marketer has to do, in large part because it has such a big impact on the company’s bottom line. Setting the right price for your product or service is hard.
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