Price sensitivity is not the same as price elasticity. A product's price elasticity shows how its demand changes after a price change. But, the price sensitivity level doesn't only depend on demand. It also depends on various drivers influencing customer buying decisions.

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This blog will show a few examples of price-sensitive products and how they set prices.

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Also Read: The Ultimate Guide to Price Sensitivity

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5 Price Sensitive Product Examples

Many factors determine a product's price sensitivity level. This includes the brand value, competition, product lifecycle, buyer frequency, competitor intensity and more. That's why the price sensitivity algorithm needs more data to make accurate suggestions.

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But, this process is complex. First, you need to identify key drivers specific to your product. You can do this discussion with stakeholders and use ML to give weight to each driver. You can do this on advanced pricing systems like Symson. Then, you interpret the price sensitivity scores to set the right prices.

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Also Read: Optimising Profits through Price Sensitivity

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Now, let’s look at some intriguing price sensitivity examples across various industries.

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1. Consumer Electronics:

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Smartphones, laptops, and other gadgets fall into the category of price-sensitive products. Consumers are aware of the features and specifications they're paying for. Price drops can lead to surges in demand, while price hikes can deter potential buyers.

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2. Air Travel:

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The airline industry is a classic example of price sensitivity. You can say that airline fares are co-dependent on passenger urgency.

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After comparing fares, travellers are quick to opt for more affordable options. Some can alter their dates or accept layovers. Others are ready to pay a premium, depending on personal urgency and schedule.

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Airlines need to strike a balance between profitability and appealing to price-conscious passengers.

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3. Fast-Moving Consumer Goods (FMCG):

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Products like packaged snacks, toiletries, and cleaning supplies are price-sensitive. Consumers have brand preferences. It also matters if they buy from the brand often, and the price change frequency of the product.

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Promotions, discounts, and price reductions can lead to noticeable shifts in sales volumes.

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4. Clothing and Fashion:

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Fashion items, especially those catering to budget-conscious consumers, exhibit significant price sensitivity. The markets see changing trends and a plethora of choices for buyers. These make consumers selective about choosing items. Like the above products, clothing brands also have price sensitive products.

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The idea is not to lower your prices as people are willing to explore premium options. It's to keep up with the changing buying dynamics. This process needs the combined intervention of Machine Learning and human pricing expertise.

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5. Grocery Items:

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Daily essentials like groceries and food items are price-sensitive. Consumers often compare prices between different brands and stores. They make such decisions based on perceived value and affordability.

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SYMSON’s Discovery of New Drivers Affecting Price Sensitivity

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Traditional pricing models include the Van Westendorp pricing model and the Gabor-Granger model. They are inaccurate, biased and have endless flaws. Businesses today use AI to manage profits and repetitive tasks in bulk. Hence, pricing across several e-commerce or physical store businesses are a huge boon.

We at SYMSON discovered specific critical drivers that influence price sensitivity. Here are a few parameters that we found but are not limited to:

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• Brand Value:

Consumers often relate higher prices with better quality. This leads to a decreased price sensitivity for established brands. But, it is quite the opposite for lesser-known brands.

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• Product Lifecycle:

A product in its introductory phase may be less price sensitive. This is because customers could be willing to pay a premium for a novel or an innovative product. When the product gains popularity in the growth stage, its sales increase. The price sensitivity tends to decrease as the product becomes more established. Increased demand and perceived value may make customers less sensitive to price changes.

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As the product reaches its peak market saturation, the price sensitivity increases. This is because the market has more growing alternatives to choose from.

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Finally, the product experiences a decline in demand. This happens when newer and better alternatives emerge. Price sensitivity can vary during this stage. But, customers may seek lower-priced alternatives or switch to newer products.

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Also Read: How to Deal with Price Sensitive Customers.

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• Price Level:

The price level refers to whether a price is cheap or expensive based on customer input and sales data. A higher price may raise its sensitivity. Besides, knowing a product's price sensitivity level gives you the key insights. You make meaningful connections about the product nature and customer choices.

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• Price Change Frequency Driver:

Price Change Frequency determines the number of times the product’s price chages. A high frequency suggests a change in the market dynamics. This makes brands follow the market dynamics and change prices. Vice versa if the price changes are low.

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• Competitive Intensity:

In a market with countless options, buyers are likelier to be more price sensitive. So, it's natural to seek either a better value or a lower-priced option. Conducting competitor analyses to revisit prices or value propositions becomes important. This helps businesses gauge competitive intensity and its effect on price sensitivity.

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Studying new parameters for price sensitivity involves human expertise and judgment. You can read our article on Optimising Profits through Price Sensitivity: The Synergy of Machine Learning and Human Expertise in Pricing Optimisation.

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At Symson, our vision is to help companies become Hyperlearningᵀᴹ organisations. We are not blackbox as our tool uses explainable AI. You will access the logic behind each recommendation. Plus, your expertise helps build a strategy that you can apply using Symson. This helps our tool practice continuous improvement. Likewise, your team and ML exchange learning becoming a Hyperlearningᵀᴹ organisation.

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‍Symson's Sensitivity Pricing Strategy

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If you are using Symson, you will already get a price recommendation after your analysis. For each product or product group, you have an option to see new prices. Given you conducted the assessment in Symson.

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Our price sensitivity algorithm is thorough in helping you optimise prices. If you want a quick demo, book a call with us. You could also check your ROI after using Symson. Use our ROI calculator to check the difference.

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Other Pricing Strategies to Optimise Price-Sensitive Products

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‍If you don't use Symson or any advanced pricing tool, we've mentioned some other strategies. These pricing strategies may be less accurate from Symson's sensitivity pricing feature. But, they are powerful enough.

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Identifying price-sensitive products can help companies categorise them. Then, they can set different pricing strategies to increase profits or sales. Hence, understanding the price sensitivity examples is actionable for businesses.

Let’s look at a few strategies to use for such products:

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• Dynamic Pricing:

For price-sensitive products, a dynamic pricing algorithm is the top recommendation. It helps adjust prices in real-time based on various micro and macro factors. For example, market conditions, competition, and demand fluctuations.

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• Bundling and Cross-Selling:

You can combine price-sensitive products with higher-margin items in bundles. This can enhance perceived value and encourage higher spending.

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• Limited-Time Offers:

You can create a sense of urgency through time-limited offers and discounts. This can prompt quick decisions from price-conscious consumers.

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• Premium Versions:

Another strategy would be offering premium versions of price-sensitive products with added features. This can attract consumers who value quality over price.

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Download Full Whitepaper: The Ultimate Guide to Price Sensitivity

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Price sensitivity examples show the delicate balance between product nature and consumer wants. Identifying which products are price-sensitive helps businesses make smart pricing decisions. It's crucial to adapt strategies that resonate with price-sensitive consumers. Companies can build lasting relationships based on perceived value.

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