‘Elasticity of demand’ measures the relationship between price and demand (Price elasticity of demand – Wikipedia) In most circumstances the lower the price the higher the demand and vice versa. A pricing strategy should model the influence of price on the demand for a specific good or service, to find a sweet spot that will optimise profit.
A pricing strategy may change during the life cycle of a new good or service, perhaps skimming the market at the start to get high prices from early adopters, when production cannot be scaled, and then lower prices to penetrate the market as the product or service becomes established and costs reduce (see Price skimming – Wikipedia).
I hope this helps.
Lew
Developer of Business Plan Quick Builder and BizzLink
Inspired by our response to a Quora question
Image by https://unsplash.com/photos/kTd2PvtqE_o?utm_source=unsplash&utm_medium=referral&utm_content=creditShareLink
