(Source: https://pltfrm.com.cn)
Introduction
For overseas brands entering China, intuitive pricing guesses won’t cut it. Only data-driven price elasticity testing reveals what your customers are truly willing to pay. Understanding these dynamics allows brands to set profitable price points while maximizing market penetration.
1. Why Price Elasticity Matters in China
1.1 Ultra-Competitive Marketplace
- Insight: Chinese platforms feature rapid price comparisons, flash sales, and aggressive promotions.
- Action: Elasticity insights help navigate this competitive environment intelligently.
1.2 Regional Purchasing Power Differences
- Insight: Consumers in Beijing behave differently from those in lower-tier cities.
- Action: Test elasticity separately across city tiers for more accurate insights.
2. Designing a Testing Methodology
2.1 Split-Group Testing
- Tactic: Divide customers randomly into groups, exposing them to different price levels.
- Result: Clean experimental data without external bias.
2.2 Time-Based Testing Windows
- Plan: Run short 1-2 week price tests to limit long-term impact on brand perception.
- Benefit: Gathers quick feedback while minimizing risks.
3. Key Metrics to Monitor During Testing
3.1 Conversion Rates
- Metric: Measure how many visitors become buyers at each price point.
- Impact: Direct indicator of pricing sweet spots.
3.2 Average Order Value (AOV)
- Metric: Track changes in cart size alongside price shifts.
- Benefit: Helps balance pricing for revenue maximization.
4. Applying Learnings to Optimize Pricing
4.1 Differential Pricing by Product Line
- Strategy: Price products differently based on their individual elasticity profiles.
- Result: Maximizes both sales volume and margins across your portfolio.
4.2 Bundling to Offset Elasticity
- Tactic: Combine highly elastic and inelastic products into attractive bundles.
- Benefit: Smooths out volatility and protects profitability.
Case Study: A Swedish Home Goods Brand’s Pricing Evolution
A Swedish brand tested elasticity for its product lines in China, discovering that minimalist furniture pieces had low elasticity while accessories like cushions and decor were highly price-sensitive. Adjusting promotional efforts accordingly, they increased category profits by 19% without resorting to aggressive discounting across the board.
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!
