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Title: Price Elasticity

Price Elasticity

Research on Magnitude and Determinants

by Evelyn Friedel (Author)
©2015 Thesis XVI, 185 Pages
Law, Economics & Management
Series: Schriften zu Marketing und Handel, Volume 16

Summary

Price is a fundamental profit driver. It is by far the most sensitive profit lever that managers can influence. Very small price changes translate into enormous changes in profit. Price elasticity indicates how sensitively consumers react to price changes. Not only the knowledge about the magnitude of price elasticity, but also the knowledge about the determinants influencing the price reaction is essential. It is crucial for the development of a successful marketing strategy to understand how price elasticities vary with market and product characteristics. Reflecting the academic and managerial need, the objective of the research is to gain a comprehensive understanding in two main areas, the magnitude of price elasticity and the determinants of price elasticity.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author
  • About the book
  • Foreword
  • Preface
  • Contents
  • List of Figures
  • List of Tables
  • 1 Aim of Research and Overview
  • 1.1 Relevance and Contribution of the Research
  • 1.2 Outline of the Research
  • 2 Foundation of Research
  • 2.1 Conceptual and Theoretical Background
  • 2.1.1 Definition and Explanation of Price Elasticity Concept
  • 2.1.2 Price Elasticity in Relationship to Price Response Function
  • 2.1.3 Price Elasticity and Price Optimization
  • 2.1.4 Terminology and Related Concepts
  • 2.2 Prior Research
  • 2.2.1 Magnitude of Price Elasticity
  • 2.2.2 Determinants of Price Elasticity
  • 3 Data
  • 3.1 Academic Publications
  • 3.1.1 Data Collection
  • 3.1.2 Overview of Selected Studies
  • 3.2 Consulting Projects
  • 3.2.1 Data Collection
  • 3.2.2 Overview of Selected Projects
  • 4 Magnitude of Price Elasticity
  • 4.1 Insights from Academic Publications
  • 4.1.1 Overview and Analysis of Price Elasticity Data
  • 4.1.2 Analysis of Selected Product Categories
  • 4.2 Insights from Consulting Projects
  • 4.2.1 Overview and Analysis of Price Elasticity Data
  • 4.2.2 Analysis of Selected Product Categories
  • 4.3 Summary
  • 5 Determinants of Price Elasticity
  • 5.1 Insights from Academic Publications
  • 5.1.1 Market Share
  • 5.1.2 Competition
  • 5.1.3 Premium Positioning and Quality
  • 5.1.4 Brand Ownership
  • 5.1.5 Direction of Price Change
  • 5.1.6 Customer Characteristics
  • 5.2 Insights from Consulting Projects
  • 5.2.1 Selection of Determinants
  • 5.2.2 Coding of Determinants
  • PRODUCT AND MARKET CHARACTERISTICS
  • Degree of Differentiation
  • Quality
  • Type of Brand
  • Absolute Price Level
  • Stage of Product Life Cycle
  • Level of Competition within Market
  • Price Transparency
  • Level of Product Complexity
  • Frequency of Purchase
  • Type of Market
  • RESEARCH METHODOLOGY
  • Price Anchor
  • Volume Measurement
  • Item Level
  • Method Used to Derive Price Response Function
  • General Information about the Project
  • 5.2.3 Expected Relationship of Determinants with Price Elasticity
  • PRODUCT AND MARKET CHARACTERISTICS
  • Degree of Differentiation
  • Quality
  • Type of Brand
  • Absolute Price Level
  • Stage of Product Life Cycle
  • Level of Competition within Market
  • Price Transparency
  • Level of Product Complexity
  • Frequency of Purchase
  • Type of Market
  • RESEARCH METHODOLOGY
  • Price Anchor
  • Volume Measurement
  • Item Level
  • Method Used to Derive Price Response Function
  • 5.2.4 Analysis of Determinants
  • 5.2.4.1 Analysis of Determinants - Average Price Elasticity
  • 5.2.4.2 Analysis of Determinants - Price Elasticity for a Price Decrease
  • 5.2.4.3 Analysis of Determinants - Price Elasticity for a Price Increase
  • 5.2.4.4 Synthesis of Results
  • 5.2.5 Industry Specific Aspects
  • Automotive Industry
  • Fast Moving Consumer Goods
  • Industrial Goods
  • Away from Home Food
  • Logistics
  • Consumer Durables
  • Pharmaceuticals and Medical Technology
  • 5.3 Summary
  • MARKET, PRODUCT AND CUSTOMER CHARACTERISTICS
  • Market Share
  • Level of Competition
  • Premium Positioning and Quality Type of Brand
  • Brand Ownership
  • Direction of Price Change
  • Customer Characteristics
  • Degree of Differentiation
  • Absolute Price Level
  • Stage of Product Life Cycle
  • Price Transparency
  • Level of Complexity
  • Frequency of Purchase
  • Type of Market
  • RESEARCH METHODOLOGY
  • Price Anchor
  • Volume Measurement
  • Item Level
  • Method Used to Derive Price Response Function
  • CONCLUSIONS
  • 6 Conclusions
  • 6.1 Key Findings
  • Key Findings on Magnitude of Price Elasticity
  • Key Findings on Determinants of Price Elasticity
  • 6.2 Implications for Research
  • 6.3 Implications for Management
  • Appendix
  • References

List of Figures

Figure 1-1:     Price Elasticity Representing the Core of Pricing

Figure 2-1:     Price Response Functions and Price Elasticities

Figure 2-2:     Frequency Distribution of Price Elasticities – 1961-2004

Figure 4-1:     Frequency Distribution of Price Elasticities – Academic Data Set

Figure 4-2:     Frequency Distribution of Price Elasticities – Laundry Detergent

Figure 4-3:     Frequency Distribution of Price Elasticities – Ketchup

Figure 4-4:     Frequency Distribution of Price Elasticities – Bathroom Tissues

Figure 4-5:     Frequency Distribution of Price Elasticities – Automotive Hard Parts

Figure 4-6:     Frequency Distribution of Price Elasticities – Yogurt

Figure 4-7:     Frequency Distribution of Price Elasticities – Margarine

Figure 4-8:     Frequency Distribution of Price Elasticities – Peanut Butter

Figure 4-9:     Frequency Distribution of Price Elasticities – Coffee

Figure 4-10:   Frequency Distribution of Price Elasticities – Coffee: Preference Measurement

Figure 4-11:   Frequency Distribution of Price Elasticities – Shampoo

Figure 4-12:   Frequency Distribution of Price Elasticities – Tuna

Figure 4-13:   Frequency Distribution of Price Elasticities – Saltine Crackers

Figure 4-14:   Frequency Distribution of Price Elasticities – Average Price Elasticity of Price Increase of 10% and Price Decrease of 10%

Figure 4-15:   Frequency Distribution of Price Elasticities – Price Decrease of 10%

Figure 4-16:   Frequency Distribution of Price Elasticities – Price Increase of 10%

Figure 4-17:   Frequency Distribution of Price Elasticities – Price Decrease of 10 % (all Data)

Figure 4-18:   Frequency Distribution of Price Elasticities – Price Increase of 10% (all Data)

Figure 4-19:   Frequency Distribution of Price Elasticities – Automotive

Figure 4-20:   Frequency Distribution of Price Elasticities – Fast Moving Consumer Goods

Figure 4-21:   Frequency Distribution of Price Elasticities – Industrial Goods

Figure 4-22:   Frequency Distribution of Price Elasticities – Away from Home Food

Figure 4-23:   Frequency Distribution of Price Elasticities – Logistics

Figure 4-24:   Frequency Distribution of Price Elasticities – Consumer Durables

Figure 4-25:   Frequency Distribution of Price Elasticities – Pharmaceuticals and Medical Technology

Figure 5-1:     Categories of Determinants Identified in Academic Publications

Figure 5-2:     Research Framework for Determinants of Price Elasticity

Figure 5-3:     Results of Regression Analysis – Determinants Analyzed with Average Price Elasticity

Figure 5-4:     Results of Regression Analysis – Determinants Analyzed with Price Elasticities for a Price Decrease of 10%

Figure 5-5:     Results of Regression Analysis – Determinants Analyzed with Price Elasticities for a Price Increase of 10%

Figure 5-6:     Overview of Effects of Determinants on Magnitude of Price Elasticity

Figure 5-7:     Stepwise Regression Analysis – Automotive

Figure 5-8:     Stepwise Regression Analysis – Fast Moving Consumer Goods

Figure 5-9:     Stepwise Regression Analysis – Industrial Goods

Figure 5-10:   Stepwise Regression Analysis – Away from Home Food

Figure 5-11:   Stepwise Regression Analysis – Logistics

Figure 5-12:   Stepwise Regression Analysis – Consumer Durables

Figure 5-13:   Stepwise Regression Analysis – Pharmaceuticals and Medical Technology

Details

Pages
XVI, 185
Publication Year
2015
ISBN (PDF)
9783653042948
ISBN (MOBI)
9783653992564
ISBN (ePUB)
9783653992571
ISBN (Hardcover)
9783631647059
DOI
10.3726/978-3-653-04294-8
Language
English
Publication date
2014 (October)
Keywords
Preisresponsefunktion Preisgestaltung Preiselastizität
Published
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2014. XVI, 185 pp., 40 b/w fig., 27 tables
Product Safety
Peter Lang Group AG

Biographical notes

Evelyn Friedel (Author)

Evelyn Friedel studied Business Administration at the University of Mannheim (Germany) and at Pepperdine University in Malibu (USA). She concentrated her studies in Marketing, International Management and Business Psychology. After having worked as a strategy and pricing consultant in Germany and the USA, she is currently engaged as a Strategic Pricing Manager in the healthcare industry.

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Title: Price Elasticity