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Price Sensitivity
How unit sales respond to changes in price.
Definition
Price sensitivity, often called price elasticity, is the percent change in quantity sold for a 1 percent change in price. It varies by category, brand, and time.
How to Calculate
Estimate elasticity using regression of log units on log price, controlling for feature, display, and seasonality. Elasticity equals the slope coefficient, interpreted as percent change in units per 1 percent change in price.
Why it Matters
Guides promo depth and base price strategy so you do not sacrifice margin unnecessarily.
Key Advantages
Quantifies response instead of guessing. Helps pick the best weeks for price changes. Compares sensitivity across SKUs to set differentiated strategies.
Example
Ice cream elasticity of −1.5 means a 1 percent price increase reduces units about 1.5 percent.
Use it to
Estimate expected unit change for a given percent price move to quantify demand responsiveness. Use sensitivity to inform pricing guardrails and promotional depth.
