Price sensitivity is when the consumer is aware of what they perceive the window of cost to be where they will consider buying a certain service or product. It is crucial that the marketing person accurately assess the sensitivity of price in their target market. Even missing the window by a small amount can have huge consequences on the bottom line of the company. Companies have to closely monitor prices or price expectations. This helps to figure out what the customer will tolerate and so that they can be as near as possible to the price that the customer is willing to pay.

Each and every customer has a certain window of acceptability of price in which they are willing and able to pay. This can and does vary from customer to customer. All customers have different price limits and perceptions of what prices are within their price range. Establishing a bottom line is where the customer perception meets the actuality. This also is indicative as to whether the market is price sensitive. There are many factors that each customer takes into consideration when determining a price that they will pay for a product or service.

This is where it is key for marketing professionals to attempt to figure out how a customer determine what price means for each person. A perfect place to study the effect and meaning of the sensitivity of price is the online retailer The customers of Priceline are extremely price sensitive and this model works very well for the company.

Customers have come to know what they can expect a provider to charge for each service and what they consider to be an excellent price as well. The customers of Priceline look for a variety of things including price and quality. When they have obtained the best pricing possible, these customers then look for quality. For instance, if there is a long layover or a departure time is not convenient or there are too many transfers, quality may be perceived as too low to make the reduced price worth the extra savings achieved.

Those in marketing must know or must quickly learn the range of price sensitivity for the product or service that they are trying to promote. The curve of demand will usually reveal the most like quantity that a marketer can sell at alternative prices. The curve of demand is equal to many different factors including the level of satisfaction, the awareness that a customer has of acceptable substitutes.