How Can Price Elasticity Help In Boosting Profit Levels?

Quite easily, you know how crowded the Internet is today. So many eCommerce stores and new websites are emerging that you need to work hard to stay afloat. Now, there is no secret of working hard; you need to have valid pricing of your commodities. Yes, we are talking pricing strategies that you need to maintain, and doing that, you can obtain more sales. More sales mean your profit margins will increase. 

But wait, is it just all about it? Guess there is something else that can play a big role in shaping up your company’s fortunes. Well, yes, we are talking about price elasticity, as that can influence the numbers a lot. Price elasticity also affects pricing strategies a lot. Do not think more as the term ‘price elasticity’ is the same thing that your high-school Economics teacher taught you. 

Now, keeping lateral talks aside, let us jump straight into the topic regarding how price elasticity can increase profit.


What Is The Need Of Price Elasticity On Consumer Goods?

Before we start with the ways price, elasticity helps in increasing profit, let us first talk about the needs. Why does your brand need to have flexibility in the pricing? Is it just because everyone else is also practicing that? 

To some extent, yes, as you need to be on par with your rivals in the market. Mainly, if you have a rival brand that has a big name and fame, chances of beating him cut down. It is not impossible, though, as you can gain customers’ trust by putting in price elasticity.


Sudden Price Hikes Of Products Can Increase Your Profit

Thinking from a customer’s perspective, the lower the price, the happier is the customer. If the prices of elastic products increase suddenly, it can help your website to gain the limelight. 

What you will need to do is keep a trace of the market prices and set the price as needed. Suppose, if the cost of tea suddenly sees an increase, you can expect your coffee business to flourish. The reason is simple, though, both tea and coffee have substitutes, and that makes them elastic.


Sudden Decrease Of Prices Can Also Benefit You

Well, this point needs the least explanation because when the prices slash down, sales automatically go up. With an increase in sales, your profit margins will also go up gradually. Eventually, you will reach a greater profit level, as your sales will continue to rise higher. The credit goes to the price elasticity of the product.


Impact Of Price Discrimination On Profits

This price discrimination happens in times of monopoly pricing. To tell in brief, monopoly pricing is the pricing of a monopolist seller. If a commodity is only available to one store at a locality or place, he shifts the price according to his wish. 

The seller dares to do that because he has a clear idea about the elasticity of demand. He will keep the price of the product high and low, based on the product’s elastic or inelastic demand. In that way, he will be able to manage getting profits no matter the elasticity is maximum or minimum.


Elasticity Of Demand To Impact Revenue Rates

Revenues face a deep rise in both cases of elasticity of demand for products. When the demand for a product is inelastic, there will be a hike in the price of the product. Now, this will not harm the seller but will benefit him instead to earn higher revenues. 

Coming to the other side of the elasticity of demand, what will happen if the demand for a product is elastic? Well, neither in this case, there will be any loss, as with the price sliding down, the sale will increase rapidly. Expect to see more revenues and let the profit margins go up eventually.

Price elasticity does come with a lot of benefits for sellers like you, irrespective of online and offline businesses. You need to note that there are several things, which influence this concept of elasticity of demand. 

Finding out what are they, we get:

  • Products with the availability of many substitutes usually have an elastic demand. This means that customers can easily jump from one product to another when needed.
  • Products with excellent fame in the market are mostly inelastic. Not just fame, even if there are lesser to no substitutes available, the demand is still inelastic.
  • Products with greater durability are also inelastic. Customers or users will keep using it no matter the price. The price increases or decreases. 


Well, also other factors influence elasticity largely. As you can see, elasticity is significant for sellers to boost their profit levels. Besides this, other factors can help a business get more profits.

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