Price sensitivity, also known as price elasticity of demand, has significant implications for a business's pricing strategy. It helps in evaluating the real value of a product, which provides insight into the customers' readiness to make a purchase. High price sensitivity indicates that customers consider the product or service overpriced, while low price sensitivity suggests that a higher price will likely not affect customers' willingness to buy. Most importantly, understanding the level of price sensitivity allows businesses to set optimal prices across all product categories and influence customer behavior through specials, discounts, and other marketing techniques.
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