Price sensitivity meter
Price sensitivity meter (PSM) is a tool used to measure the sensitivity of consumers to changes in prices. It helps businesses understand how customers will react to price changes and make more informed pricing decisions.
There are different types of price sensitivity meters, but one common method is the Van Westendorp Price Sensitivity Meter. This method involves asking consumers a series of questions about their willingness to purchase a product at different price points. By analyzing the responses, businesses can determine the optimal price point for their products.
For example, if a company is considering raising the price of a product, they can use the PSM to gauge how customers will react. If the meter shows that customers are highly sensitive to price changes, the company may decide to keep the price the same to avoid losing customers.
On the other hand, if the meter shows that customers are willing to pay more for the product, the company may decide to increase the price to maximize profits.
Overall, price sensitivity meters are valuable tools for businesses looking to optimize their pricing strategies and maximize their profits.
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