How to Talk to Data Scientists

CHAPTER 8

Playbook

Pricing

List Pricing

Pricing decisions are subject to two opposing forces—price increases decrease the likelihood of retaining a customer, while price decreases diminish the profitability of obtained customers. When selecting the optimum price, we look at elasticity. Some products are notoriously price insensitive: regardless of the price, customers will buy in the same quantity (often because of some perceived necessity or superiority in quality such that customers can neither buy nothing nor switch to a competing provider). Most products exhibit at least some price sensitivity, and consumer goods are notoriously sensitive as competing alternatives exist on the same store shelf. Though rare, some products actually exhibit ...