|Overview: Price Sensitivity|
The degree to which demand drops as you increase the price of a product or service.
Modeling price sensitivities is the basis for many pricing strategies.
What is Price Sensitivity?
John Spacey, updated on January 13, 2023
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.
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