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TERM
Marketing Elasticity Engine (MEE)
Sensitivity of demand to a change in a driver.
Definition
Elasticity is the percent change in sales for a 1 percent change in price or another variable.
How to Calculate
Estimate using regression of log sales on log price or the driver.
Why it Matters
Guides pricing and media decisions.
Key Advantages
Comparable across items and time.
Example
Price elasticity of -2.0 means 1 percent price up, 2 percent sales down.
Use it to
Use modeled price-response relationships to forecast impact of pricing or promotion decisions. Compare predicted versus actual results to refine elasticity estimates.
