Automated Price Sensitivity Meter (PSM)

Price sensitivity is measured using price elasticity of demand, which tracks how consumer demand shifts when prices change—products with high elasticity see major demand changes from small price shifts, while inelastic products maintain steady demand despite price changes.

quantilope automates this measurement so you can focus on the results, not the manual and complex calculations. 

Luxury items typically show low price sensitivity because brand prestige keeps sales stable even when prices increase, while everyday groceries demonstrate high price sensitivity as shoppers quickly switch to cheaper alternatives when prices rise.

Price sensitivity indicators include brand value, competition level, product lifecycle stage, purchase frequency, and competitor intensity. These factors feed into algorithms that calculate how responsive consumers are to price changes for a specific product.

The Van Westendorp Price Sensitivity Meter uses four pricing questions:

1. At what price is the product too expensive to buy

2. What price is it expensive but worth considering

3. At what price is it a bargain?

4. At what price is it too cheap that quality becomes questionable.

Unlike pricing methods like Conjoint Analysis that force trade-offs between features, the Price Sensitivity Meter (also known as Van Westendorp) focuses solely on consumer psychological price points using four open-ended questions. It identifies a specific "range of acceptable prices" by finding the intersection of perceived value and "too expensive" or "too cheap" thresholds.

The Optimal Price Point occurs at the intersection where the number of people who think a product is "Too Cheap" equals the number who think it is "Too Expensive." This point theoretically minimizes resistance, as it balances the risk of losing customers due to high cost against losing them due to perceived low quality.

The Indifference Price Point is where the "Cheap" and "Expensive" curves cross, representing the median price people expect to pay. Most consumers at this price point don't have a strong opinion on whether the product is a deal or a splurge, making it a safe but potentially low-margin benchmark.