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High price sensitivity for a product implies that customers are very responsive to changes in the product's price. If the price increases, customers may reduce their demand or switch to alternatives, affecting the company's sales and profits. Conversely, if the price decreases, it may stimulate demand, leading to increased sales but potentially lower profit margins. Therefore, companies need to carefully manage their pricing strategies considering their customers' price sensitivity.
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To determine how sensitive your customers are to your prices, you need to divide demand quantity by the percent of change in price. The difference is your customer's price sensitivity. PMs will often introduce discount codes to check conversion on a decreased price to determine their customer's price sensitivity. (Slide 9)
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How do you take your product management to the next level? Due to popular demand, we've expanded our Product Development Toolkit to include more tools...
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