Do you have questions about Data Science?

We’d love to hear from you. 

Contact

Case study: Determination of price elasticity

The fashion industry is known to be especially price sensitive. Demand and inventory levels are largely dependent on pricing policies. Optimal pricing is therefore an important factor for economic success. In one project, COSMO CONSULT developed a mathematical model to determine price elasticities of individual products. Today, the information helps the company to optimize initial prices, discounts and marketing campaigns. In addition, the sale of products can be predicted with more accuracy with price cuts.

Key Facts

  • Determining the best prices to maximize profits
  • Optimizing discounts and marketing campaigns
  • Providing input for dynamic pricing

Initial situation

Price setting is a crucial topic especially in the fashion industry with strategic (initial prices, price levels) and operational significance. Optimal pricing helps increase the demand and reduce the existing stocks at a faster rate. Unfortunately however, the effect of price setting is not systematically recognized or used in many companies. Instead, fixed price lists or copies are often used to set prices. In addition, other influencing factors, such as the different demand behavior of individual customers, are often disregarded.

COSMO CONSULT was commissioned to develop a model to determine price elasticities while taking into account external factors. Subsequently, it was planned to test the model in further studies.

Approach

Based on the sales history, it was necessary to calculate the empirical price elasticities for each individual product. Therefore, a large number of other parameters and underlying conditions were taken into account: In addition to seasonal effects, especially during events such as Christmas or Easter, special offers played a crucial role and thus found their way into the model. Based on all available data, price elasticities could be calculated for each individual product and product group, which were then used for price setting.

The algorithm, which was developed and implemented using C ++, was able to automatically and flexibly parameterize the calculation of price elasticity.

Additional benefit

With price elasticities, companies can benefit from a much clearer view of the overall pricing. The information can be used for targeted discounts and marketing campaigns and serve as a basis for optimizing the initial prices. In the context of dynamic pricing, you can also predict the sale after a price cut.

Ask our experts

COSMO CONSULT has many years of experience in providing digital solutions in the field of data science. Our services are based on a clear approach, detailed knowledge of business processes, and excellent product expertise. Our experts will be happy to advise you on the unique possibilities available to you when you use modern software technologies. Please give us a call! We look forward to talking with you on how your business can enter the digital age.

Contact Us!

Cosmo Consult

COSMO CONSULT International

COSMO CONSULT SI GmbH
Lothringerstraße 14
1030 Wien
E-Mail
Cosmo Consult in Chile
COSMO CONSULT CHILE SaP
Mardoqueo Fernández 181
Providencia - Santiago de Chile
+562 2382 8050
E-Mail
COSMO CONSULT COLOMBIA SAS
We Work - Calle 26 # 92-32, Oficina 3-131
Bogotá - Colombia
+57 3004846267
E-Mail
Contact Costa Rica
COSMO CONSULT COSTA RICA
Calle 37, Avda 14 Edf. Grupo Jurídico, Pl 3 Ofc. 1 3
San José
E-Mail
Cosmo Consult in Ecuador
COSMO CONSULT Business S.L
Checoslovaquia E10-105 y Eloy Alfaro
Quito, Ecuador
‪+593 99 608 4180
E-Mail
Cosmo Consult in France
COSMO CONSULT
201 rue Carnot
94120 Fontenay-sous-Bois
+33 1 83010360
E-Mail
Cosmo Consult in Germany
COSMO CONSULT
Schoenebergerstr. 15
10963 Berlin
+49 30 343815-0
+49 30 343815-111
E-Mail
Cosmo Consult in Hungary
COSMO CONSULT KFT.
Rétköz utca 5. 1118 Budapest Magyarország
+36 1 899 9000
E-Mail
Cosmo Consult in Mexico
SOLUCIONES EMPRESARIALES COSMO CONSULT MÉXICO S.A.P.I de C.V
Arquímedes 15, Col. Polanco V Sección
Delegación Miguel Hidalgo
Ciudad de México C.P 11560
+521 55 83109660
E-Mail
Cosmo Consult in Panama
COSMO CONSULT PANAMA & CENTRO AMERICA S.A.
Trump Tower, Piso 2, Oficina 210
Punta Pacífica
Ciudad de Panamá, República de Panamá
E-Mail
Cosmo Consult in Peru
COSMO CONSULT PERÚ SAC
Avenida Javier Prado Oeste 757
Magdalena del Mar - Lima, Perú
+51940225294​​​​​​​
E-Mail
Cosmo Consult in Romania
COSMO CONSULT Business Solutions SRL
59, Petru Maior St., 1st District, RO-011261, Bucharest
+40 21 224 5516
E-Mail
Cosmo Consult in Sweden
COSMO CONSULT AB
Ralambsvaegen 17
11259 Stockholm
+46 8 7998660
E-Mail
Cosmo Consult in Barcelona, Spain
COSMO CONSULT SPAIN, S.A.U.
Vallespir, 19 4ª Módulo 2
08173 Sant Cugat del Vallès, Barcelona
+34 902820242
E-Mail
Cosmo Consult in Switzerland
COSMO CONSULT
Ruetistrasse 13
8952 Schlieren
+41 44 8306465
E-Mail