Friday, 21 December 2012

How to measure Price Sensitity of Customers

How to know if a Customer is Price Sensitive?

Understanding the customer based on his price bracket has lot of benefits. This would help the retailer stock products of appropriate price in the category and help the marketing team with sending suitable discounts / promotions.

What is Price Sensitivity?

Before we dive deep into this, it's better to have it defined to avoid ambuigity later. This is the change in buying behavior of the customer of a particular product / category due to the change in price. This means a customer will have different price sensitivities for different product or categories. This is sometime called as Price change sensitivity too

How to measure the price sensitivity?

There are various ways to measure it for a customer-product. One way is to find the demand elasticity.

We will discuss in detail on demand elasticity with some examples

Can a product's sales increase even when there is increase in Price. Though strange there are chances that it would be - these are called Giffen goods

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