As a marketer, especially if you’re a senior marketer, you likely have a pretty good idea of what price elasticity is. So let’s use that as an introduction to the idea of brand elasticity.
If you could use a quick reminder, however, price elasticity is, according to Harvard Business Review Contributing Editor Amy Gallo, a calculation marketers use to determine how a change in a product’s price (up or down) affect demand for that product.
Price elasticity is a rear-view mirror metric that allows a marketer to know the impact on demand after the change in price. Its formula looks like this:
Beyond the value of precisely measuring a product’s price elasticity, there is benefit from a broader understanding of just how sensitive (or not) a product is to price swings.
That simple understanding of how sensitive one attribute is to the movements of another attribute also lies at the core of the concept of brand elasticity, which gauges how sensitive consumer preference is for a certain brand when it stretches beyond its positioning or expands into new categories.
Whenever I talk with a marketer about brand architecture, one of the fundamental concepts always at play is brand elasticity. To marketers who are unfamiliar with the term, I share the following example: Imagine a new brand of ice cream brought to you by Exxon Mobile. Crazy, right? Of course it is: We all recognize that Exxon Mobile cannot stretch into a category so distant from its own and be credible, let alone create preference, in the category.
That extreme example may be a case of what academics would refer to as “perfect elasticity.” What it means is that any shift away from the oil and gas category will absolutely be met with a dramatic change (in this case, negative) in consumer preference. In other words, variability is assured.