Price sensitivity: 4 determining factors

A company needs to know how to price a product or service, this task is essential for its success. Thus, price sensitivity helps an enterprise with one of the most difficult obligations, since the manager will be able to find a balance between the profit and the price that the clients would pay.

In this sense, it is important to emphasize that when doing the price sensitivity analysis, you will know how much consumers are willing to pay for your products or services. To determine a conscious value and make good decisions, it is necessary to pay attention to the factors that may influence the choice of your customers. Read on and find out what they are!

1. Reference price#

Most consumers compare products, even during the simplest purchases they analyze other options. The reference price, that is, the one that the customer uses to compare the purchase.

All prices are a reference, since they form the general reference level. The higher the price relative to the substitute services and products received around the customer, the greater the price sensitivity.

2. Ease of comparison#

All services and products can be replaced with others. So the easier it is to compare your service with other options, the greater the price sensitivity will be. Know that products with a strong brand are harder to compare.

Therefore, weak brands that sell their attributes and characteristics especially can be compared more easily. For example, if a customer goes to the supermarket to buy a cookie and all of them are appetizing in the package, he will choose the one with the lowest value. Thus, it is essential to seek to differentiate your product, so that there is no other alternative during the purchase.

3. Quality#

One of the decisive points in a customer’s decision-making is quality. Many of them believe that the more expensive, the better the quality and its performance. Thus, in several situations, the price ends up being higher than it is actually worth.

Price is an indication of quality, and when the buyer doesn’t know your product, the higher price may mean higher quality. What’s more, a higher price may mean prestige and status, which is what some customers seek when purchasing a particular item.

4. Justice#

Customers’ perception of fairness has significantly influenced price sensitivity. Injustice usually stems from various price discrimination practices, which may not be a bad thing, since action is a practice aimed at profit. However, when the perception of injustice emerges, a small increase in the value of the service may be negative.

The buyer likes a fair price. Thus, it is necessary to be consistent during pricing so as not to lose sales. To avoid major setbacks, it is recommended to compare the current price with the price paid before and with those of similar products.

Therefore, by understanding the determinants of price sensitivity, you can determine an amount that your customers paid for your brand. Nowadays, it is essential to know how to carry out this step in order to stand out in the market and boost sales.

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