Smarter Pricing: How to capture more value in your market

Chapter summary

• To achieve higher prices, you need to understand customer’s price sensitivity. Generally when prices rise, fewer people will buy and they will buy less frequently – known as the price elasticity of demand.

• Price sensitivity varies between product categories and brands. It also varies over time. Nagle and Holden have identified nine effects to reduce price sensitivity. Actions are recommended.

• Price sensitivity also varies between customers. An average price will be less than some customers are willing to pay, so value is lost. The average price will also be too expensive for other customers and sales will be lost.

• The answer is price discrimination where prices differ between customers (first degree), or between purchase conditions ...