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Price Sensitivity Definition

Marketing Definitions

16 Oct 2019 • 1 min read • Austin shong

Price Sensitivity Definition

What is Price Sensitivity?

Price sensitivity definition: price sensitivity is the impact of pricing on consumer’s purchasing behavior. Ultimately, it aims to see how price affects demand.

Price sensitivity works on the assumption there are three options when it comes to changing a product’s price:

  • Increase
  • Stay the same
  • Decrease

It then looks to see how the demand for a product will change if a brand applies one of these options.

Consumer’s price sensitivity can change drastically depending on the industry. To illustrate, let’s look at two wildly different brands – Rolex and Oreo:

  • Increase: could increase demand for Rolex, but lower it for Oreo
  • Stay the same: may not affect Rolex, but Oreos could easily be undercut
  • Decrease: could lower demand for Rolex, but increase it for Oreo

Assessing and testing price sensitivity can make it much easier for brands to determine the pricing strategy for their products.

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