Price Sensitivity

Price sensitivity and price elasticity (cf.) are the same in concept: they both evaluate how price changes alter demand. But while price elasticity is a quantitative notion, price sensitivity is a more qualitative measure, taking into account, for example, notions such as segmenting buyer demographics and trying to understand how each segment of a supplier’s broad customer base might react to price changes. Some segments will react more strongly than others so customer segmentation and how product sales are distributed is a key determinant of price sensitivity. Sensitivity analysis is invariably based on empirical consumer surveys.