Price elasticity and marginal utility are critical concepts when evaluating an online service product. Price elasticity measures the responsiveness of demand to a change in price; it indicates how much the quantity demanded of a service will change when the price increases or decreases. For example, if an online subscription service raises its price by 10% and experiences a 15% drop in subscriptions, the price elasticity of demand can be calculated as -1.5, indicating that the demand for this service is elastic.

In contrast, marginal utility reflects the additional satisfaction or benefit a consumer derives from consuming one more unit of the service. For online services, this can be closely tied to features offered, user experience, and perceived value. If a platform introduces new features that significantly enhance user satisfaction without a proportional price increase, users may perceive a high marginal utility, potentially justifying a higher price point.

To effectively set pricing strategies, businesses must closely monitor both price elasticity and marginal utility. A nuanced understanding allows for the optimisation of pricing to maximise revenue while ensuring the perceived value remains high for consumers. In competitive online markets, failing to align service pricing with these economic principles may result in lost customers or diminished brand loyalty. Thus, a delicate balance between pricing, service enhancements, and consumer satisfaction must be maintained to foster growth and sustainability.