Factors that affect price sensitivity

05/02/2021

Angela de la Vieja

Whether you have a physical or online store, you’ll definitely be familiar with price sensitivity. Likewise, even if you don’t know it, you’ll have probably felt its effects at some point in the life of your company.

Why is it so important?

Price sensitivity is a concept that is closely linked to the price elasticity of demand, how much sales go up or down as the price changes, which you must keep very much present when setting the prices for your products since it’s key to generating sales. High sensitivity to price means that customers will probably refuse to buy a product or service based on if they consider the price to be unreasonable. On the other hand, if there is low sensitivity to price, the price tag won’t bother them especially. The higher the price sensitivity is, the more sales techniques you can apply to influence the customers’ purchases.

Knowing the price sensitivity of your products will serve as a measurement to know the impact that price changes have on the purchasing behaviour of your customers. A thorough understanding of price sensitivity will help you discover what price range you could use to maximise profits as well as the impact that price changes have on your sales.

Factors

There are a number of determining factors for the price sensitivity of a product, such as geographical, economic, sentimental, or the necessities that these entail, the latter being one of the main factors. This means that consumers will have low sensitivity to changes in price for basic necessities while, on the other hand, the demand for luxury goods will be affected by price changes since these items aren’t essential. Along with this, substitute items must also be considered as a factor that can influence the demand for a basic necessity when there are items that can replace them, such as private labels. The greater the presence of these products, the greater their effect on the price will be.

Another influential factor is the proportion of their income that the consumers spend on an item. Goods that require a good proportion of the consumer budget tend to have more elastic demand.

Price sensitivity in the marketing strategy

Having a deep understanding of the target market where you operate as well as your buyer personas will be key to success. Demand is variable and responds to different factors that are directly related to your marketing policies. Understanding which elements affect the price elasticity of your products is relevant to be able to adjust your prices accordingly, while keeping in mind your user profile. So, if you want to increase your sales by lowering your prices, this won’t always be a smart move as it will depend on the product itself. For example, for certain branded goods that are perceived as “special”, “exclusive”, or “quality”, lowering their price could generate the opposite sensation and harm the perception that users have of the brand. In addition, this could also make it difficult to raise the price in the future. For this type of product, you can carry discount coupons strategies to create a unique opportunity effect without affecting the image of the product. In short, positive price sensibility will be generated.

Monitoring tools will allow you to gain vital knowledge about the market where you’re operating and know the demand curve or price sensitivity of the consumers, thus allowing you to find the optimal point that will allow you to set the correct price that generates greater profits.

11/11/2022

Consumer behavior: How can behavior tracking be effective for setting the right pricing strategies?

Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true. If done right, it can conquer every market for the business quickly. With abundant data available, the strategic makeover of the pricing models is becoming easy for companies.

What is behavioral tracking, and how is the data beneficial in pricing?

For a quick understanding, behavioral tracking refers to gaining in-depth knowledge and insights into consumers through their web data. Their browsing habits, spontaneous decisions, shopping interests, and preferences come under behavioral tracking.

How can enterprises use customer behavior data?

Companies can use customer behavior data as a tool to strengthen their hold on the market. A customer’s preferences, values, and tendencies allow businesses to work in sync with them through the collected data. Apart from this, customer behavior can also aid in:

Tailoring customer needs for customer retention

Personalization is becoming the heart of a company’s growth. No matter in which area an enterprise is functioning, tailoring the services, products, and solutions is becoming increasingly crucial. Uniqueness and personalization attract the crowd like no other.

Increasing the overall value

One of the best ways customer behavior data affects a business is by upgrading the value of customers for the business. The customer’s characteristics allow the company to target the people that match the business prospects well.

Optimizing every type of content

Everything that is up for digital display requires content. You must have seen companies unveiling their products or services through advertisements and making the initial public appearance. Two essential sales strategies – upselling and cross-selling comes through content optimization.

Pricing Strategy

Last but certainly not least is the influence of customer behavior data on the pricing strategy. The pricing strategy essentially constitutes content derived from data analysis. Companies need to have a dynamic approach to the pricing system to attract the right customers.

17/02/2015

Saint Valentine’s Day, always a good opportunity

V-Day is looming, a long-awaited date for all and also a good occasion for the eCommerce. According the study conducted by Prosper Insights and Analytics, it is forecasted the average consumer expense that day will be the highest in last years. Furthermore, 25% of them will buy online, which means an increase of 4% regarding 2014 (The US department of Commerce). This is, therefore, a key date where market competitiveness increase and which could be assumed as a big opportunity for our business or, a big fail if we do not adopt the correct strategies.

How to turn this event into an opportunity? To achieve this goal, we need to adapt our prices to this hostile environment, i.e. we need to develop an appropriate Dynamic Pricing strategy that allows us to adapt our prices to the variations produced in supply and demand and to position us ahead of our competitors. In V-Day, the frequency in changes will be higher, carrying it out each hour or even each minute. It is estimated that 65% of leader retailers have the ability to respond quickly at these variations, such Amazon. For this reason, it acquires great importance the correct use of a software specialised in price motorisation of competitors. Do not miss the time and adapt your business to new adversities.

28/12/2022

Which are the best footwear marketplaces to sell on?

Footwear marketplaces are booming. The last decade has seen the launch of new specialized marketplaces with millions of different users. Among them are Spartoo, Sarenza and Farfetch, portals with international reach. Their main value is that they unite hundreds of footwear brands, as well as offering clothes and accessories. Although each has its own characteristics, they are all vertical marketplaces, i.e., they focus on a specific area, and their sales categories are interrelated. For sellers, these portals provide an opportunity to expand sales channels and drive the globalization of their e-commerce business. We explain how to sell on these footwear marketplaces so that you can assess whether they align with your plans for the future and then start defining a possible pricing strategy.