Mapping Pricing Elasticity Scores to Factors PPT

This PPT slide, part of the 38-slide Pricing Strategy PowerPoint presentation, outlines the process of determining the Point of Perfect Elasticity and mapping a pricing elasticity score to a corresponding elasticity factor. The primary focus is on translating a pricing elasticity score into a tangible elasticity factor, which reflects how changes in pricing will impact demand.

The slide presents a scoring system ranging from 4 to 12, with each score linked to an elasticity factor. The highest score, 12, is anchored to an elasticity factor of 190%, indicating a strong sensitivity to price changes. The Point of Perfect Elasticity is defined as 100%, meaning that for every percentage change in price, there is an equivalent percentage change in units sold. This is critical for understanding how pricing strategies can be adjusted based on market conditions.

The slide emphasizes the importance of establishing 3 key anchor points: the upper bound, the mid-point, and the lower bound. For stronger brands, the Point of Perfect Elasticity should be anchored higher than the mid-point score, while weaker brands should have it lower. This nuanced approach allows for a more tailored pricing strategy that aligns with brand strength and market positioning.

The remaining elasticity factor values are derived from these anchor points, creating a structured framework for businesses to assess their pricing strategies effectively. This systematic mapping is essential for executives looking to refine their pricing models and understand the implications of price changes on demand.

Overall, the slide serves as a guide for executives to navigate the complexities of pricing elasticity, ensuring informed decision-making in pricing strategies.

This slide is part of the Pricing Strategy PowerPoint presentation.

This Pricing Strategy framework is created by former McKinsey, BCG, Deloitte, EY, and Capgemini consultants. It teaches the Strategy Consulting approach to formulating a Pricing Strategy. Financial model also included.

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