Price sensitivity analysis

Price elasticity, also referred to as price elasticity of demand, is a measure of how much consumer demand for a product changes in response to changes in price. If the quantity that consumers order changes a lot in response to a change in price, then the price elasticity is very high. Knowing how consumer demand is related to pricing is a critical part of any business.

It is important for the suppliers to understand how cost sensitive the customers are; so that they should focus on some strategies always to keep their customers falling under least price sensitive stage.

Price sensitivity can be checked using any of the two pricing models –

  • Van Westendorp model
  •  Gabor Garner model

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