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