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What is Price Sensitivity?

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Price sensitivity is the degree to which demand drops as you increase the price of a product or service. At the individual customer level, this can be viewed as a drop in conversion rate as you increase the price.
Price sensitivity varies greatly from one customer to the next. For example, in many cases businesses and governments are willing to pay far more than individuals.
It is common for pricing strategies to charge different prices based on a variety of factors designed to separate customers based on price sensitivity. For example, airlines may charge a lower price for tickets that involve a Saturday night stay. This is designed to identify business travelers who are typically less price sensitive.
Overview: Price Sensitivity
Type
Definition
The degree to which demand drops as you increase the price of a product or service.
Value
Modeling price sensitivities is the basis for many pricing strategies.
Related Concepts

Pricing

This is the complete list of articles we have written about pricing.
Algorithmic Pricing
Bargaining Power
Benchmark Price
Commoditization
Price Fixing
Cost-plus Pricing
Equilibrium
Price Gouging
Customary Pricing
Decoy Effect
Everyday Low Price
Marginal Utility
Willingness To Pay
Dynamic Pricing
High-Low Pricing
Market Value
Flat Pricing
Loss Leader
Predatory Pricing
Price Discrimination
Snob Effect
Market Price
Price Competition
Price Leadership
Premium Pricing
Price Economics
Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
Pricing Power
Pricing Strategy
Sticky Prices
Value For Money
More ...
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