Imagine, for a moment, that you printed out every article on the internet about marketing promotions, and every article about price elasticity. For the first stack – promotions – you’d need a warehouse full of paper and a decent air purifier. For the second – price elasticity – maybe just a sturdy notebook. And yet, in that quieter stack lies one of the most under-used levers for growth in modern marketing.
We live in a marketing world that celebrates big campaigns, media moments, and bold creative; the kind of work that gets you on a yacht in Cannes. But understanding and influencing price elasticity of demand (PED)? That’s the kind of thinking that could put you on the purchase contract of a superyacht.
Because here’s the thing: if marketing is meant to grow the business, then what better way to do it than helping the company sell more units at the same price, or sell the same amount at a higher price?
That’s the real magic of price elasticity. It’s not just a theoretical concept from economics lectures – it’s a practical, often underappreciated tool for shaping smarter pricing strategies, strengthening margins, and helping the whole business grow stronger.
What Price Elasticity Really Means for Marketers
At its simplest, price elasticity of demand tells you how much demand changes when you move your price.
The formula is straightforward:
PED = % Change in Quantity Demanded / % Change in Price
If you raise prices by 10% and sales drop by 20%, your PED is 2 – meaning your demand is elastic and your customers are quite price-sensitive. But if you raise prices by 10% and sales barely change, you’ve got a low elasticity – and potentially more pricing power than you thought.
But rather than fixate on the number, marketers should care about the zone your brand sits in:
- Highly elastic (PED > 1): Small price changes create big swings in sales – common in categories like electronics or fashion, where customers are spoilt for choice.
- Inelastic (PED < 1): Customers stay loyal even as prices go up – often the result of strong brand equity, perceived quality, or convenience (think Apple, Netflix, pantry staples).
- Unit elastic (PED = 1): Price and demand move together. You’re walking a tightrope.
The beauty of this metric? It’s not fixed. It can be influenced. And that’s where marketers come in.
Marketing Can Shift Elasticity — And That’s a Big Deal
A lot of energy in marketing goes into justifying spend. We talk about reach, engagement, ROI, and brand lift, but what if we also looked at how marketing reshapes price sensitivity over time?
Done well, effective marketing can make your brand more inelastic – meaning customers are less likely to switch or balk at a price increase. You’re not just driving sales today; you’re improving your future pricing power.
That’s what Brent Smart, former CMO of IAG, did back in 2019. He picked a region in Australia and focused purely on brand-building activities for two years with no promos or discounts. The result? Customers in that region became significantly less price-sensitive. The brand had become stickier, more resilient, and better positioned for long-term growth.
If marketing can shift elasticity, then it’s not just a cost, it’s a margin multiplier.
Testing Elasticity in the Real World
You don’t need a lab to measure Price Elasticity, just a bit of structure and willingness to experiment. Here are two smart, accessible ways to begin:
- Run price tests in controlled environments (e.g., online store, POS trials). Adjust pricing slightly and observe the impact on sales.
- Layer in marketing variables. Test different messages, formats, or brand-building activity alongside pricing to see how each affects demand elasticity.
Over time, you’ll build a clear picture of how different audiences respond, and where your brand earns the right to charge more.
Elasticity as the Gateway to Smarter Pricing Strategy
Once you understand your brand’s elasticity, you can start planning for growth with confidence. It opens the door to more refined pricing strategies, such as:
- Volume maximising / penetration pricing: Set low prices to build scale fast – ideal for disruptors or value-focused brands (think Amazon or ALDI).
- Profit maximising: Maintain high prices and margins with strong brand equity – the Chanel, Apple, or Louis Vuitton playbook.
- Bundling: Combine products or services for higher perceived value – like Microsoft’s all-in-one Office suite
- Loss leading: Sell a key product at a low margin (or a loss) to lock in future value – the same strategy Gillette or Nespresso use with razor handles or coffee machines.
- Freemium: Offer a base tier for free, then monetise with upgrades – a strategy born in tech but useful in services, too.
All of these depend on your ability to predict how demand will respond. In other words, understanding elasticity.
A Shared Language Between Marketers and the Business
For too long, pricing has been left to finance, and marketing left to campaign briefs. But in volatile times, with inflation, competition, and shifting consumer loyalty, the real opportunity lies in bringing these disciplines closer together.
Regularly tracking and discussing elasticity gives marketing teams a seat at the commercial table. It lets agencies and internal teams align around not just creative or channels, but growth outcomes.
More importantly, it helps marketers talk the language of the boardroom. Instead of simply saying “the campaign worked,” you can say “we’ve reduced price sensitivity in a key category, and opened up room to grow margin next quarter.”
That’s the kind of insight CEOs and CFOs remember.
The Smarter Marketer’s Growth Lever
In a profession that’s often asked to prove its value, price elasticity offers marketers something refreshingly tangible. It links the work we do, like building brands, earning attention, deepening customer relationships, to something the business can measure and bank: revenue and profit.
When you reduce your brand’s price sensitivity, you gain permission to raise prices, protect margins, or hold firm while others discount. And that’s not just a win for marketing, that’s huge for the entire business.
Too often, PED is treated as the domain of economists or pricing analysts. But in truth, it belongs to marketers too. Because the elasticity of your brand isn’t fixed. It bends in response to the equity you build, the trust you earn, the distinctiveness you shape.
So yes, sticking with promotions might get you on the yacht. But if you want to build something enduring that earns its place on the P&L as well as the awards shelf, then start with price elasticity. You don’t need to be an economist. Just a marketer with commercial curiosity and a seat at the table where growth decisions are made.
We’re in the business of helping ambitious brands unlock growth by getting closer to the levers that matter: pricing power, brand resilience, and commercial clarity. If you’re ready to explore how price elasticity could shape your growth strategy, we’d love to show you what’s possible.
