The clipping threshold is a price level beyond which customers are less inclined to purchase a product. It represents a critical point where any further increase in price would result in a significant decrease in demand.
The clipping threshold varies depending on the product, brand, market, and consumer preferences. When the price exceeds this threshold, customers may perceive the product as too expensive and seek out more cost-effective alternatives.
Retailers must therefore be aware of this threshold to establish an optimal pricing strategy, ensuring a balance between profitability and demand. They can utilize market data, price analysis, and market studies to determine the clipping threshold and adjust their prices accordingly to maximize sales and profitability.