The idea
Price elasticity measures the percentage volume response to a percentage price change. The illustration uses absolute values and the simple percentage method: a 10% price cut and a 15% volume increase give 1.5. Revenue rises 3.5%, but contribution may still fall. The midpoint method uses the average of the two prices and quantities and gives about 1.33 for the same example. State the method, check cannibalisation, and calculate contribution before recommending a change.
Use it thoughtfully
- Estimate elasticity before any price change.
- Check cannibalisation from your own bigger packs.
- Confirm the margin effect, not just revenue.
An example
ILLUSTRATIVE EXAMPLE: An Indonesian 10 GB pack drops from Rp 50,000 to Rp 45,000. Volume rises 15%, so revenue rises 3.5%. The team then checks how many buyers traded down from a Rp 75,000 pack.
A question to try
For your best-selling pack, do you know its elasticity, and where did that number come from?
A useful framework is a starting point, not a guarantee. Effects vary with the audience, product and situation. Use truthful evidence, respect customer choice, and test the result.