What Is Price sensitivity?
Price sensitivity refers to the manner that the price of a product influences the purchasing choices of consumers.
It’s also known as price elasticity of demands. This refers to the degree to which the demand for the product as well as service can be affected. In general it’s about how the demand fluctuates as the price of goods and services change.
Price sensitivity is typically determined by an index of price elasticity, or the measurement of the changes in demand in relation of the price change.
Some consumers are not willing to shell out a few cents more per gallon of gasoline in particular if there’s an affordable station close by.
The process of making decisions for consumers
Before knowing how the price-sensitivity process works, it’s crucial to comprehend the buyer’s behavior as they go through the buying process
- Recognition The buyer is aware that they’re somewhere in between the “real and preferred state.” It doesn’t matter if it’s through advertising, marketing, or the pressure of peers, they are enticed to purchase a item.
- Information looking The buyer is looking to discover more details on what they would like to purchase.
- Deliberation Based on the data that is gathered, the consumer decides the best options, alternatives, or factors to take into consideration prior to taking action. This is the place where price sensitivity could be developed and you could be losing the customer.
- Purchasese The purchaser decides what to buy , and does it.
- The purchase that follows The buyer decides if this is the thing he or her wanted and if it was a wise choice in the event that he or her regrets the decision, and if it’s an appropriate time for the customer to either return or exchange their item or ask for a refund.
Factors that influence the sensitivity of prices
For businesses price sensitivity, it is an essential factor for making the right decisions and determining the best prices. This is where market research companies in chennai can help you understand the consumers and their behavior.
Here are a few factors that are considered to be factors by customers when they purchase products or services.
- Quality and price: Buyers are less affected by price if the item offered is of superior quality or defines their status for example, expensive or luxurious items.
- Unique value The differentiation of products and distinctive features affect the price of consumers' sensitivity to it. With exclusive quality products or services an organization will be able to win over its competition.
- Benefits to the bottom line: If the utility of the product is very high for the purchaser and it efficiently achieves the purpose of purchase the buyer is less concerned about price.
- fairness Discrimination in price can result in the perception of unfairness in the eyes of consumers. In this scenario an increase in price could result in a negative effect and increase price sensitivity.
- Cost: If the product needs a large investment or has a high price customers tend to be price-sensitive when making a choice.
- Stock: If buyers need to ensure that their items are available, they will become more conscious of their costs.
- Sensitivity to the urgency In the event of urgent demand for the item or services, the customer typically overlooks the cost factor. One example of this is in the case of an medical emergency services.
- Cost-sharing If the cost of a service or product is paid by someone else in the name of the buyer the product or service might not be price sensitive.
- Comparison ease: Consumers are more priced-conscious if they are able to quickly compare the various choices that are available on the market.
- Perceived substitutes If consumers can find an equivalent product or service to an item or service for less cost, they are priced-sensitive.
- Cost of switching: If the cost of switching from one provider to another is extremely high Consumers prefer to be less cost conscious and stick with one product or service.
- Image of the brand: Loyalty to particular brands could be a major factor that could reduce or increase price sensitivity.