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Price sensitivity, also known as price elasticity of demand, is a measure of how the demand for a product changes with a change in its price. If a product is highly price sensitive, a small change in price can lead to a significant change in the quantity demanded. This can affect sales volume as a higher price may lead to a decrease in sales volume if the product is highly price sensitive. Conversely, a lower price may increase sales volume. Understanding price sensitivity can help businesses set optimal prices and predict sales volume more accurately.
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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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