Elasticity
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Elasticity
There is not much knowledge in the market you are active in on price-elasticity. You can check. this article. For sure your customers will also have some kind of reaction to prices which will not be linear. But, yes there is elasticity of the price in the market. This means that customers will react to the price in a certain way. They will have their decisions as to buy the product or not depending on the price change. Generally spoken a higher elasticity would mean that customers will react vividly to a price change: if your price goes up with 10%, you might lose more than 10% of your sales or occupancy rate. If you have the price dropped with 10% this will bring you more then 10% extra sales.
Pitfalls
- Of course, the price is not the only item customers decide on
- Customers remember the prices of last year as well
- Elasticity is always related to a price range. Breaking the barrier of € 100 or € 200 by raising your price from € 98 to € 102 has much impact(a higher elasticity) then raising the price from € 90 to € 94 (almost the same increase).
- Getting a buyers strike. If the prices go way too low or way too high you will have a buyers strike in the market, the elasticity will bring an extreme reaction at a certain point as you (all) might have lost credibility then. This means people will choose for the competition on a higher level and will exchange the hotel plans for a long-haul trip or a package deal or even buy new furniture instead of booking. All of the demand sides then will shrink.
So you can try to do some calculations on this, this might give you a rough idea and indication.
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