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Price sensitivity, also known as price elasticity of demand, is a measure of how the quantity demanded of a product changes with its price. It is directly related to the real value of a product as it provides insight into the consumers' perception of the product's value. If a product has high price sensitivity, it means consumers consider it overpriced and are less likely to buy it if the price increases. On the other hand, a product with low price sensitivity is seen as reasonably priced or valuable, and a price increase is less likely to affect its demand. Therefore, understanding price sensitivity can help businesses set optimal prices and predict sales volume.
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Price sensitivity (a.k.a. price elasticity of demand) evaluates the product's real value which, in turn, provides an insight into the shoppers' readiness to swipe their cards. Knowing the product's price sensitivity gives the power to forecast the sales volume more accurately. The high price-sensitivity signals that customers consider the product or service unreasonably overpriced. And the low price sensitivity signals that the higher price will most likely have no negative effect on shoppers' willingness to purchase the product. But most importantly, knowing the level of price sensitivity allows to set optimal prices across every category in the product line, as well as influence customer behavior through specials, discounts and other marketing techniques.
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Take the most advantageous pricing approach to increase profitability of your organization. Use our Pricing Strategies presentation to outline factors...
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