Understanding the Characteristics of Price Elasticities for Frequently Purchased Packaged Goods
This study examines category and brand level factors of packaged goods to determine which ones are related to brand price elasticities. A new nonparametric method of elasticity calculation is presented that is suited to situations where detailed feature and display information is not available. To obtain results that lead to strong and reliable generalisations, we examine 26 categories and 110 brands using store level weekly scanner data. We also synthesise our results with four previous studies that have looked at determinants of price elasticities. Three factors consistently emerge as important drivers of elasticity. They are, competitive intensity in the category, whether or not the product is storable and the brand market share. A further, less certain, factor is the frequency of promotion activity, with categories and brands having more frequent promotions exhibiting lower sales increases when one or more of the brands price promotes.
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