What does it mean if consumers are price sensitive?

Price sensitivity is the degree to which the price of a product affects consumers’ purchasing behaviors. For example, some consumers are not willing to pay a few extra cents per gallon for gasoline, especially if a lower-priced station is nearby.

What is Van Westendorp pricing model?

The Van Westendorp pricing model reveals the ideal range of pricing, based on the value relayed by [+] As price increases, the number of people who believe that the product is too cheap or not expensive decreases, while the number of people who believe that the product is not a bargain or too expensive increases.

How do you analyze van Westendorp?

Analyzing the Results of a Van Westendorp Survey The results of a Van Westendorp survey start by plotting curves with cumulative responses for each price point. The expensive price points go from low to high, and the cheap/bargain price points go from high to low.

What is point of marginal cheapness?

Point of marginal expensiveness – The price point where cost becomes a major concern, and where customers will generally feel that the price of the product/service outweighs the benefit.

What is a good that replaces another demanded good?

Substitution Effect- a good that replaces another demanded good. Law of demand – the way that a change in price determines whether or not consumers buy goods. Complement- a good that is always used with another good.

How do you know if a customer is price sensitive?

Price sensitive customers are those who view price as a serious factor in a purchase. Some customers view extremely low prices as too good to be true and may assign a poor value to a product without having tried it. These types of prestige price customers often refuse to purchase a product of lower cost.

How do you calculate price sensitivity?

Price sensitivity can be measured by dividing the percentage in the quantity purchased of the product or service with the percentage change in the price.

What is optimal price point?

The optimal price is that price point at which the total profit of the seller is maximized. When the price is too low, the seller is moving a large number of units but is not earning the highest possible aggregate profit.

What is a good that consumers demand more of when their income increases?

A normal good is a good that consumers demand more of when their incomes increase. An inferior good is a good that consumers demand less of when their income increases.

What is the name of the smallest amount that can legally?

26 Cards in this Set

What happens when wages are set above the equilibrium level by law?	Firms employ fewer workers than they would at the equilibrium wage.
What is the name of the smallest amount that can legally be paid to most workers for an hour of work?	minimum wage

Why is price sensitivity important?

Price sensitivity deals with the consumer’s sensitivity to price changes and is important for strategic decisions. Price has a significant influence on the behavior of consumers and consequently on firm revenues and profits. When the price elasticity is smaller than one the demand will be price inelastic.

How is the price sensitivity meter ( PSM ) created?

Created by Dutch economist Peter Van Westendorp in 1976, the Price Sensitivity Meter (PSM) measures price sensitivity not by calculations (unlike to PED) but by surveying people on their willingness to pay in four different price brackets. The PSM is based on four (4) survey questions:

When did Peter van Westendorp introduce the price sensitivity meter?

Since there is an inherent assumption that price is a reflection of value or quality, the technique is not useful for a true luxury good (that is, when sales volume increases at higher prices). Peter Van Westendorp introduced the Price Sensitivity Meter in 1976 and it has been widely used since then throughout the market research industry.

Which is the best way to measure price sensitivity?

Social media or in-store polls are a good way to evaluate how customers value one or another product. Track customers’ online activities. For e-commerce retailers, the analysis of visitors’ online behavior and, especially, conversion rate might be particularly insightful in terms of evaluating price sensitivity.

Why are consumers becoming more sensitive to price?

Easy access to information about price and product features also increases consumers’ sensitivity to price. As consumers increasingly make web-based price comparisons at home and on the go, they are becoming more sensitive to prices. It is believed that price points may also affect the price elasticity of demand.