Price sensitivity, also known as price elasticity of demand, can significantly impact a company's profitability. If a product has high price sensitivity, it means customers consider it overpriced, and any increase in price could lead to a decrease in sales volume, negatively affecting profitability. On the other hand, if a product has low price sensitivity, the company can increase the price without significantly affecting the customers' willingness to purchase, potentially leading to higher profitability. Understanding price sensitivity allows a company to set optimal prices and influence customer behavior through marketing techniques, ultimately affecting profitability.
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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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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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