(Source: https://pltfrm.com.cn)
Introduction
China’s retail landscape is one of the most dynamic in the world, where even slight changes in pricing can trigger major shifts in consumer behavior. Understanding price elasticity — how sensitive your Chinese customers are to price changes — is critical for optimizing profitability and scaling your brand. Here’s how overseas brands can systematically test and apply price elasticity insights in China.
1. Building a Price Testing Framework
1.1 Controlled Price Experiments
- Approach: Select specific SKUs and vary their prices across different regions, time periods, or customer segments.
- Impact: Provides clean data on how price changes affect demand without confounding variables.
1.2 Platform-Specific Testing
- Method: Run different price points on Tmall vs JD.com to detect platform-specific elasticity behaviors.
- Benefit: Helps tailor platform-specific pricing strategies.
2. Data Collection and Measurement
2.1 Sales Volume Tracking
- Tactic: Monitor units sold at each price point over a defined time frame.
- Result: Establishes direct correlations between price changes and purchasing behavior.
2.2 Cart Abandonment and Bounce Rate Analysis
- Plan: Track changes in cart abandonment rates and page bounce rates during price experiments.
- Impact: Identifies when prices cross psychological resistance thresholds.
3. Analyzing Elasticity Metrics
3.1 Calculating Price Elasticity Coefficients
- Method: Use elasticity formulas to quantify how a 1% price change impacts sales volume.
- Benefit: Provides hard data for pricing optimization decisions.
3.2 Identifying Elastic vs. Inelastic Products
- Insight: Products like luxury goods tend to be more inelastic, while daily commodities are highly elastic.
- Action: Helps set differentiated pricing strategies across your catalog.
4. Using Elasticity Data to Shape Pricing
4.1 Strategic Discounting
- Tactic: Offer deeper discounts only on highly elastic products to drive volume.
- Result: Maximizes ROI on promotions.
4.2 Premium Stability Strategies
- Approach: Maintain pricing discipline on inelastic, premium SKUs to protect brand equity.
- Benefit: Enhances profitability and brand positioning simultaneously.
Case Study: A Canadian Outdoor Gear Brand’s Elasticity Insights
Testing slight price increases across Tmall and JD, a Canadian outdoor brand found that their premium tents were largely inelastic (sales held steady), while their accessories were highly elastic (sales dropped with small price hikes). They shifted their promotional focus toward elastic products, boosting total category revenue by 22% in six months.
PLTFRM is an international brand consulting agency that works with companies such as Red, TikTok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries’ exports in China account for 97% of the total exports in Asia. Contact us, and we will help you find the best China e-commerce platform for you. Search PLTFRM for a free consultation!
