How a Shopify Seller Discovered Hidden Insights Using Product Price Elasticity Analysis
After analyzing 56 stores, we discovered something surprising about how price sensitive are my products—and it completely changed how I think about competitive advantages.
Here's what I mean: We were working with a Shopify merchant who sold premium kitchen gadgets. She was convinced her customers were extremely price-sensitive. Every time a competitor dropped their prices, she'd panic and match them. Her margins were shrinking, and she felt trapped in a race to the bottom.
But when we ran a price elasticity analysis on her catalog, we found something that shocked both of us.
The Challenge Nobody Talks About
I've talked to hundreds of Shopify sellers, and almost all of them make pricing decisions based on gut feeling or competitive matching. They'll say things like:
- "If I raise prices even 5%, my customers will leave."
- "I have to stay below my competitors or I'll lose sales."
- "My products are commodities—price is all that matters."
The problem? Most of them have never actually tested these assumptions with their own data. They're flying blind, making critical pricing decisions without knowing how their specific customers actually respond to price changes.
This merchant was no different. She'd been in business for three years and had never looked at the relationship between her price adjustments and sales volume. She just assumed her customers shopped on price alone.
What the Data Revealed
When we pulled her Shopify data and ran the numbers, the picture that emerged was fascinating. We looked at every product in her catalog and calculated how sales volume changed when prices moved up or down.
Her bestselling product—a high-end garlic press priced at $34.99—had an elasticity coefficient of -0.3. In plain English, that meant if she raised the price by 10%, she'd only lose about 3% of sales volume. Her customers weren't nearly as price-sensitive as she thought.
But here's where it got really interesting.
We found that her lower-priced items—the $12 to $18 range—were actually MORE elastic. Those customers WERE shopping on price. A 10% increase would cause a 7-8% drop in volume.
She had it completely backwards. She'd been protecting the margins on her cheap stuff and racing to the bottom on her premium products, when the data screamed that she should do the opposite.
The Surprising Insight About Competitive Advantage
After we analyzed those 56 stores—including hers—I started seeing a pattern that completely changed how I think about e-commerce pricing.
The stores with the strongest competitive advantages weren't the ones with the lowest prices. They were the ones that knew which products they could charge premium prices for.
Here's what we learned:
Premium products with strong brand positioning are often inelastic. Customers buying that $35 garlic press weren't just buying a tool—they were buying into a lifestyle, a sense of quality, maybe even status in their cooking community. A few dollars didn't matter much to them.
Generic or commodity items stay elastic no matter what you do. Those cheaper kitchen tools? Customers could find similar versions everywhere. Price was genuinely the differentiator there.
Your competitive advantage lives in the gap between what customers will pay and what you're charging. Every inelastic product represents uncaptured value. You're literally leaving money on the table.
I remember sitting with this merchant on a video call, walking through her analytics dashboard, showing her these patterns. She went quiet for a moment, then said: "So I've been competing on price for products where I didn't need to, and ignoring my actual competitive advantage?"
Exactly.
Taking Action on the Insights
We built out a strategy based on the elasticity data. It wasn't complicated, but it was precise:
For her inelastic premium products (elasticity between -0.5 and 0), we recommended strategic price increases of 8-12%. These were her hero products with strong differentiation.
For moderately elastic products (elasticity between -0.5 and -1.0), we kept prices stable but focused on bundling strategies to increase average order value.
For highly elastic products (elasticity below -1.0), we actually recommended occasional promotional pricing. These were her traffic drivers, not her profit centers.
The key insight was that she could use elasticity data to segment her pricing strategy. Not every product needed to compete on price. In fact, competing on price for her premium items was actively hurting her business.
We also set up monitoring through our tutorial system so she could track how customers responded to the changes in real-time. No more guessing—just data.
Results and Lessons Learned
Over the next quarter, we watched her business transform.
She raised prices on 12 of her premium products—her inelastic winners. Just as the data predicted, her sales volume barely budged. She lost maybe 2-3% of unit sales on those items, but her revenue increased by 9.4% and her margins improved dramatically.
On the flip side, she started running flash sales on her elastic products every few weeks. These drove traffic spikes, got new customers into her ecosystem, and actually increased overall conversions because people would come for the deal and add premium items to their cart.
Within three months, her overall revenue was up 14% without increasing ad spend. Her profit margins improved by nearly 6 percentage points. And here's the kicker—her customer satisfaction scores actually went UP.
Why? Because she stopped trying to be everything to everyone. She leaned into what made her special: curated, premium kitchen tools for people who care about quality. The price-sensitive customers who left weren't her ideal buyers anyway.
I've seen this pattern repeat across dozens of stores now. The businesses that thrive aren't the cheapest—they're the ones that understand their pricing power and use it strategically.
Your Turn: Finding Your Pricing Advantage
If you're running a Shopify store and making pricing decisions without elasticity data, you're essentially navigating in the dark. You might get lucky, but you're probably leaving money on the table—or worse, competing on price when you don't need to.
The question "how price sensitive are my products?" isn't rhetorical. It's answerable. You have the data sitting in your Shopify store right now.
Here's what I'd recommend:
- Run a price elasticity analysis on your full catalog. Look at how your actual customers have responded to price changes over time.
- Segment your products into elastic vs. inelastic categories. Be honest about which products are truly differentiated.
- Develop different pricing strategies for each segment. Premium products can often handle price increases; commodity products might be better as traffic drivers.
- Test incrementally and monitor the results. Start with small changes and watch how your customers respond.
One merchant I worked with recently told me this analysis was "like putting on glasses for the first time." Suddenly everything was clear. She could see exactly where she had pricing power and where she didn't.
That clarity is your competitive advantage. While your competitors are guessing, you're making decisions based on how your actual customers behave.
Want to run this analysis on your own store? We built a tool that does exactly this. It connects to your Shopify data, calculates elasticity coefficients for every product, and shows you exactly where you have pricing power.
Try the Product Price Elasticity Analysis →
And if you want to dive deeper into similar analytical approaches for other platforms, check out our article on Square item modifier analysis—many of the same principles apply across different commerce systems.
You can also explore our interactive demo to see how all these analytics work together to give you a complete picture of your business performance.
The data is there. The insights are waiting. You just need to look.
I'd love to hear what you discover about your own products. Drop me a note if you run the analysis—I'm always curious to hear what patterns emerge in different niches and markets. Sometimes the most surprising insights come from the stores you'd least expect.
Until next time,
The MCP Analytics Team