Customer price sensitivity, also known as price elasticity of demand, refers to the degree to which the price of a product affects consumers' purchasing behaviors. If a small change in price leads to a significant change in the quantity demanded, the product is said to be price sensitive. It impacts pricing by determining the optimal price point for a product. If customers are highly sensitive to price, a lower price may lead to higher sales volume and potentially higher total revenue. Conversely, if customers are not very sensitive to price, a company may be able to charge higher prices without significantly affecting sales volume.
Need to evaluate the best pricing strategy for a product? This Pricing Strategy spreadsheet includes...
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