What is customer price sensitivity?

Customer price sensitivity refers to how much a product’s price influences consumers’ purchasing behaviors. Generally, it is how demand changes with the cost of products change. How does local-global identity affect price sensitivity?

How do you calculate price sensitivity?

Price sensitivity is measured by dividing the percentage of change in quantity by the percentage change in price. For example, if you sell dog food and increase the price by 50% and sales drop by 12%. Using this formula, we can calculate the price sensitivity of the dog food. The higher the number, the more sensitive people are to price increases.

What does low price sensitivity mean?

Low price sensitivity can indicate customers are highly motivated to buy the product no matter the cost, while high price sensitivity can indicate price increases might discourage customers from buying. If the price of an item or service is high, a customer might choose to go with another brand, especially if other options are available.

Who is a price-sensitive consumer?

For the purposes of the study, we used a narrow and rather strict definition of a price-sensitive consumer: a person who buys the lowest-price option, even when comparable products are available for a price difference of less than 5%.