Factors that affect price sensitivity

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Price sensitivity


Profile picture for user Angela de la Vieja

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.



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.

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