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Why price is not linear

Price does not behave linearly. A 5% price increase rarely produces exactly 5% lower volume. The reaction depends on where you are on the price scale, which category you operate in, and which thresholds exist in the consumer's perception.

Most pricing models rest on an implicit assumption: that price response is linear. Raise the price by 10% and you lose X% volume, and that relationship is constant. In reality, it does not work that way. Price response is a curve with steep and flat segments, and the interesting points are where the curve changes character.

In practice, this means there are price intervals where you can raise the price with no noticeable volume effect, and others where a small increase triggers a dramatic reaction. These thresholds depend on category, brand strength, competitive landscape and the consumer's reference points. A linear model misses all of this.

Reflect works with non-linear price models that identify these thresholds empirically. We measure price acceptance in a way that respects the actual shape of the curve — not a simplified straight line through the data points.

Key takeaways

  • Price response is a curve with thresholds, not a straight line
  • The same percentage price change produces different effects depending on starting price
  • Category and brand strength determine where thresholds lie
  • Linear models systematically underestimate risk at price thresholds
  • Monadic measurement captures the real curve better than price series

Example

A grocery company raised the price of a product by 8% with no volume loss — but the next increase of only 3% led to a 15% volume drop. The price had crossed a threshold that a linear model had not identified.

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Monadic pricing model

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