How can price sensitivity be measured or determined?

Price sensitivity, also known as price elasticity of demand, is a measure of how the quantity demanded of a product changes with its price. If a product has high price sensitivity, it means customers are very responsive to changes in the product's price. If the price goes up, customers are less likely to buy the product, and if the price goes down, they are more likely to buy it. On the other hand, if a product has low price sensitivity, changes in the product's price have little effect on customers' willingness to buy it. Therefore, understanding a product's price sensitivity can help businesses predict how changes in price will affect sales volume and customer readiness to make a purchase.

Price sensitivity can be used to develop effective marketing techniques by understanding the product's real value and the customers' willingness to purchase. High price sensitivity indicates that customers may view the product as overpriced, while low price sensitivity suggests that a higher price will not negatively impact the customers' willingness to buy. This knowledge allows for the setting of optimal prices across every category in the product line and can influence customer behavior through specials, discounts, and other marketing techniques.

Understanding price sensitivity for a business has several benefits. It allows the business to evaluate the real value of their product, which can provide insight into the readiness of customers to make a purchase. It also gives the business the ability to forecast sales volume more accurately. If a product has high price sensitivity, it may signal that customers consider it overpriced. On the other hand, low price sensitivity may indicate that a higher price will not negatively affect customers' willingness to purchase. Most importantly, understanding price sensitivity can help a business set optimal prices across their product line and influence customer behavior through specials, discounts, and other marketing techniques.