BSG Game Tips – Price Elasticity
An in depth analysis can be done on a BSG company regarding price elasticity. There is usually a $5 price spread where the demand for shoes will not experience a significant change. I’ve seen many companies plot the price vs the demand and see where the price elasticity range is. Of course though being on the upper end of the price range is usually the most profitable and should be sought after to attain. But what are the effects of price elasticity if you are go below or above the range?
If you go above the range, demand will start to be noticeably lower. In some rare cases where supply isn’t enough to meet demand, this would prove to be more profitable. This is because prices must go up if there isn’t enough supply to meet demand.
If you go below the range, demand will rise exponentially, which is a key way to maintain market share. In very common circumstances where there is a recession with an oversupply of shoes for the demand, stealing other company’s market share is a way of survival.
Although the price of your shoe does have affect on the industry, the great industry trends won’t usually be affected by what you decide I’ve seen companies fret they have gone below or above the price elasticity range and are concerned of what negative effects can occur by going against the norm. These negative effects include diminished market share with increased prices, or a furthered recession with decreased prices.
In essence, every year a new price elasticity range will be created due to the collective industry forces that control the market. While one company does have input to the industry average of prices, it is because there are usually several other competitors that creates a situation that no one really can control. Therefore it is best to play each year with the best decision set, as price elasticity is constantly changing.