How sensitive to price are your customers? Should you make that price cut to keep up with new entrants to the market?
Whilst this is obviously a complex issue, there are a number of factors to search for in your customer base that may indicate they are less worried about the price of your goods or service than you think:
8 Factors of Low Price Sensitivity:
- You have a distinctive product
- Customers are unaware of alternatives
- Customers have difficulty comparing the quality of alternatives
- The cost is a negligible part of the customers overall income
- The cost of your offering is only a small part of an end product’s total cost
- Some or all of the cost is paid by another party
- The product or service relates to previous asset or expenditure
- The customer assumes your product or service is better
Businesses can use the 8 Factors of Low Price Sensitivity to better understand how price affects their customers.
If your customers are price sensitive, there are a few things you can do to stop them focusing on price, which I cover in another post here.
This list is a modified version of the one found in Kotler & Keller’s “A Framework for Marketing Management”, which also lists a ninth factor:
9. Buyers cannot store the product.
However I have some doubts on this one, so have left it out until an explanation for it is found. Perhaps, if the consumer can’t store the product, would it be a perishable, leading to a repeat purchase and a more commodity based pricing structure?
If you can explain it to me, hit me up in the comments! Thanks!