Price sensitivity, also known as price elasticity of demand, plays a crucial role in determining the profitability of a product. It evaluates the product's real value and provides insight into the customers' readiness to purchase. High price sensitivity indicates that customers consider the product overpriced, which could negatively impact sales and profitability. On the other hand, low price sensitivity suggests that a higher price will not affect customers' willingness to buy, potentially leading to increased profitability. Furthermore, understanding price sensitivity allows for the setting of optimal prices across product categories and influencing customer behavior through marketing techniques such as specials and discounts.
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