Price Sensitivity

Price Sensitivity

Price Sensitivity Jonathan Poland

Price sensitivity is a measure of how much the demand for a product or service decreases as the price increases. It can be seen as the drop in conversion rate as the price of a product or service goes up. The degree of price sensitivity varies greatly among different customers, with some individuals being more willing to pay higher prices than others. For example, businesses and governments may be willing to pay more for a product or service than individual consumers.

Pricing strategies often take price sensitivity into account by offering different prices to different customers based on factors that indicate their level of price sensitivity. For example, an airline may offer lower prices for tickets that require a Saturday night stay, as this is typically a signal that the customer is a business traveler who is less sensitive to price. This allows the airline to target their pricing more effectively and maximize their revenue.

Here are some examples of price sensitivity:

  1. Customers who are willing to pay a premium price for a high-quality product or service
  2. Customers who are shopping on a tight budget and are very sensitive to price increases
  3. Customers who are loyal to a particular brand and are less sensitive to price changes
  4. Customers who are willing to switch to a competitor’s product or service if the price is lower
  5. Customers who are willing to pay a higher price for convenience or time savings
  6. Customers who are price sensitive when it comes to purchasing necessities, but less sensitive when it comes to luxury items
  7. Customers who are price sensitive when it comes to products or services that they use frequently, but less sensitive when it comes to infrequently purchased items
  8. Customers who are price sensitive when it comes to products or services that have many substitute options available, but less sensitive when it comes to products or services with few substitutes.
Learn More
Manufacturing 150 150 Jonathan Poland

Manufacturing

Manufacturing is a critical phase in business development, especially for companies that produce physical goods. The synergies between manufacturing and…

Market Expansion Jonathan Poland

Market Expansion

Market expansion is a growth strategy that involves offering an existing product to a new market.

Early Adopters Jonathan Poland

Early Adopters

Early adopters are individuals who quickly adopt an innovation. Marketing and selling innovative products can be challenging as it may…

Pricing Strategy Jonathan Poland

Pricing Strategy

Pricing strategy is the process of determining the right price for a product or service based on market conditions, business…

Budget Variance Jonathan Poland

Budget Variance

Budget variance is the difference between the budgeted amount and the actual amount spent on a department, team, project, or…

Foot in the Door Jonathan Poland

Foot in the Door

The foot-in-the-door technique is a persuasion strategy that involves asking for a small favor or agreement first, before making a…

Expectancy Theory Jonathan Poland

Expectancy Theory

Expectancy theory is a motivational concept that suggests people are motivated by their beliefs about the relationship between their efforts…

Corporate Governance Jonathan Poland

Corporate Governance

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It…

Experience Economy Jonathan Poland

Experience Economy

The concept of the experience economy suggests that companies can differentiate themselves and gain a competitive advantage by creating memorable…

Content Database

Search over 1,000 posts on topics across
business, finance, and capital markets.

Product Cannibalization Jonathan Poland

Product Cannibalization

Product cannibalization refers to the situation in which the sales of one product within a company’s portfolio negatively impact the…

Marketing Technologies Jonathan Poland

Marketing Technologies

Marketing technology, or “martech,” refers to the tools and software used to support marketing efforts, such as advertising, brand management,…

Inverted Yield Curve Jonathan Poland

Inverted Yield Curve

The inverted yield curve is a financial phenomenon that has garnered significant attention because of its historical association with upcoming…

Pricing Power Jonathan Poland

Pricing Power

Pricing power refers to a company’s ability to increase prices without significantly impacting demand for their products or services. This…

Total Addressable Market Jonathan Poland

Total Addressable Market

A total addressable market (TAM) is the total potential revenue that a company can generate from its products or services…

Fiduciary Duty Jonathan Poland

Fiduciary Duty

Fiduciary duty refers to the legal obligation of one party to act in the best interests of another party. This…

Sales Data Jonathan Poland

Sales Data

Sales data is a type of business intelligence that provides information about the performance of a company’s sales activities. This…

Quantum Computing Jonathan Poland

Quantum Computing

Quantum computing is a fascinating and rapidly evolving field that seeks to harness the principles of quantum mechanics to perform…

Exchange Rate Risk Jonathan Poland

Exchange Rate Risk

Exchange rate risk, also known as currency risk, is the risk that changes in exchange rates will negatively impact the…