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Blog,  Digital Marketing,  Pricing

How Digital Marketing Influences Price Elasticity

Since the rise of the Internet, digital marketing has grown to be a reliable form of reaching consumers, expanding a brand’s message, and facilitating the data analysis process. Beyond social platforms and brand awareness, digital marketing also has a knack for influencing an important aspect of business: price elasticity. While the term can sound a bit strange to some, price elasticity is critical in helping marketers and business owners determine optimal pricing strategies for products and services.

With more than 4.66 billion users on the Internet around the world, digital marketing efforts have definitely worked their magic in changing certain consumer behaviors, particularly in how they fulfill their needs based on pricing. For example, if a consumer is shopping for a camera at Best Buy and learns about a lower-priced alternative from an online ad, they will likely purchase the latter. This increases price elasticity, which can directly impact a company’s sales and other internal channels.

Knowing how digital marketing efforts impact price elasticity can strengthen your own digital marketing efforts and help you decide on an effective pricing strategy that you can incorporate across all channels.


What is price elasticity?

As a refresher, let’s explore what price elasticity is. According to Harvard Business Review, price elasticity showcases the responsiveness of consumer demand after a product or service’s price changes. In other words, it is a type of measurement that asks us: how sensitive are consumers to changes in price? If a product is considered elastic, it indicates that consumers are highly sensitive to changes in its price. If it’s not elastic (inelastic), then consumers are generally indifferent about these changes.

Price elasticity is highly important when it comes to understanding consumer and marketing behavior. It can provide us with insights on whether a specific price will allow us to achieve our overall objectives.


How does digital marketing influence price elasticity?

Effective digital marketing can affect price elasticity in a variety of ways. In most situations, certain digital marketing efforts provide consumers with full control in their purchasing decisions such as:


  1. Knowledge of alternative options.

Prices fluctuate all the time, but consumers don’t necessarily need to pay for the new price of a product if there’s an alternative just like it. That’s just how digital marketing works. Through the combination of online ads, social media, and content marketing, marketers and business owners can inform consumers about the nature of their products and services, especially if it’s priced lower than competing brands. The Internet is at the touch of a consumer’s fingertips and provides them with countless options. Even a small increase in pricing can cause customers to look somewhere else for a product or service, which, in turn, increases price elasticity. Keep this in mind when you’re deciding on a pricing strategy.


  1. Increasing the appeal of a product.

Most marketing efforts revolve around increasing a consumer’s desire for a company’s respective product or service. Due to the nature of most digital ads and content, consumers may feel they need to make purchases for a particular product, leading to a decrease price elasticity. For example, take a look at influencers on Instagram. Many consumers may feel compelled to purchase a product based on the appeal an influencer creates around it. This can even lead to the creation of a culture surrounding a product or brand loyalty (we’ll get to that in a second!). This type of increased demand and brand appeal can decrease price elasticity so that any price changes you make won’t make much of an impact.


  1. Generating strong brand loyalty.

Brand loyalty has a massive impact on price elasticity—and digital marketing is a key ingredient in generating it! Of course, this is easier said than done. Achieving brand loyalty takes work and most marketing campaigns have this as a key objective in mind during their runs. Through brand loyalty, consumers have a close connection to a respective brand, which means they’ll purchase it over competing brands. This type of attachment makes a product or service inelastic, so consumers aren’t sensitive to price changes. Consider Apple as a perfect example. Most consumers are willing to pay for Apple products, regardless of pricing. Why? Apple has done a fantastic job in creating a culture around their products, so consumers feel a close attachment to the brand, leading to inelasticity.


Determining price elasticity can be a useful asset in your marketing efforts since it allows you to measure consumer response to a product’s price fluctuations. Remember: the last thing you want is to drive consumers away to alternative products that offer lower prices. By taking this blend of calculations and digital marketing efforts into consideration, you can make informed decisions on choosing optimal price changes that maximize profitability while also meeting the needs of your consumer base.

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