Pricing Analytics: Creating Linear & Power Demand Curves 

As he says in the video: "price elasticity stays at 2 regardless what we do with the price per shirt".

The basic theories behind these methods still apply to your situation, but you're definitely in a "special case" area. I'm normally loathe to do this, but I think you're going to need to talk to a consulting firm (there are several good ones you can find via a Google search for "pricing strategy" or "pricing consultants"). I suspect your main problem is going to be a very thin data set that makes it difficult to do any sort of statistical analysis. A possible strategy might be to cluster similar shows together and treat them as a single "product". I don't know if it'll apply to your scenario, but there should be a similar RU-vid video in this channel that discusses estimating demand curves without factoring in elasticity.

How did he determine it was 2%??

Harri son Its 2% because the elasticity is calculated to be 2. %increase in price decreases demand by (elasticity) %

2/1

increase in price of your product does not affect your price elasticity, this means that you cant use the linear demand curve. Try the power demand curve.

Generally, doing large-scale A/B testing is the only way to establish to a statistical certainty which curve to use. If you're selling consumer goods, you can buy data from syndicated providers like Nielsen, IRI, NPD, etc that you can use to establish this. (For a sizable consulting fee, they can do all of that for you.) In the real world, the curves are usually pretty close to each other for most products inside real world pricing bands. People tend to use the linear method just because it's easier to compute and understand (or at least easier to explain to sales and marketing executives), unless they discover it diverges too much from reality. Then they shift over to the power curve.

Thanks for responding! Appreciate it.

The formula for price elasticity is simple - its the % change in demanded quantity divided by the % change in price. Determining those KPIs is what's difficult - you need to either hire an econometrics firm to determine them for you, or gradually slide the price of your product up and down for a few weeks at a time and measure the change in demand at each price point. Again, that's harder than it sounds, since you need to try to control for external variables like seasonality and promotions. A quick and "good enough" solution most firms follow is to buy a year's worth of weekly sales data from a syndicated data provider like Nielsen, IRI, or NPD and then review the Unit Sales and Average Price KPIs. Depending on how accurate you want to be, you can calculate your product's price elasticity for the entire US or calculate the different elasticities for different markets and trading areas.

Michael Lamont hi michael thanks so much for quick response this helps me a lot, thanks!

Amy Gallo at the Harvard Business Review wrote a nice blog post that I think does a good job explaining in detail how elasticities are calculated and used, if you're looking for some additional info: hbr.org/2015/08/a-refresher-on-price-elasticity

Woof. That's a big topic - there are entire textbooks devoted to it, several of which will probably teach you what you're looking for. If you search Amazon for "marketing strategy" and "promotion strategy" you should turn up plenty of options. But thanks for the suggestion - that's something I can try for a future course.

Good series of videos. Clear, concise and to the point.

I'm going to need a little more information to help you. Exactly where are you in the process, and exactly what information do you believe Excel isn't showing you?

See my reply to your earlier comment for instructions on how to determine a product's price elasticity. For the example in the video, I made it up. ;-)

Owkie understood thanks though😊