Post on 05-Sep-2018
TheRightPrice
SantiagoGallino– TuckSchoolofBusinessToniMoreno– KelloggSchoolofManagement
July2013– LBS– London,UKJanuary2017
29May2017 2RetailFundamentals
LearningModules
1.Demandforecasting
2.InventoryDecisions
3.AssortmentPlanning
4.PricingDecisions
5.Theomnichannelcustomer
6.Fulfillingomnichanneldemand
7.Omnichanneljourneys
8.Supportinganomnichannel
strategy
29May2017 4RetailFundamentals
M4.3Priceelasticity2
QuantitySoldatDifferentPrices
Ifcustomersareverypricesensitive,salesdecreasesignificantlywithpriceincreases
29May2017 5RetailFundamentals
M4.3Priceelasticity2
Elasticity=percentchangeinquantitysoldpercentchangeinprice
Acommonlyusedmeasureofpricesensitivity:
29May2017 7RetailFundamentals
M4.3Priceelasticity2
• Ingeneralwewouldexpectthatpriceelasticitywillbenegative
• Buttheremightbesituationswhenproductswithpositivepieceelasticity
29May2017 8RetailFundamentals
M4.3TheOptimalPrice3
QuantitySoldatDifferentPrices
Ifcustomersareverypricesensitive,salesdecreasesignificantlywithpriceincreases
ProfitatDifferentPrices
29May2017 9RetailFundamentals
M4.3DefiningpricesandPriceelasticity
4
CustomerPriceSensitivityandCost
29May2017 10RetailFundamentals
M4.3Closing2
• Tolearnaboutpriceelasticityretailerscanlookathistoricalsales
• Differentproductshaveverydifferentpriceelasticity.• Andthepriceelasticityforaproductcanvaryfordifferent
customerssegments.• Youcanbegladlysurprisewhenyoudiscoverthatyoucan
increasethepriceofaproductswithoutaffectingsalesinameaningfulway.