How to Measure Price Sensitivity
Estimate how preference changes across plausible price levels and offer configurations.
The Short Version
Estimate how preference changes across plausible price levels and offer configurations. A practical way to begin is to define the offer and target customer, then select prices that span a plausible decision range. Finish by making sure you compare survey results with observed conversion and margin data. The full walkthrough below explains each part in order.
Is This Guide for You?
Pricing and strategy teams exploring the range in which customer preference begins to change materially.
Follow These Steps
Work through these 6 steps at your own pace. The wording is intentionally practical, and you can return to the checklist at the end when you are ready to review your work.
- Define the offer and target customer.
- Select prices that span a plausible decision range.
- Randomize price or include it as a conjoint attribute.
- Keep non-price information consistent.
- Estimate changes relative to the reference price.
- Compare survey results with observed conversion and margin data.
What This Helps You Accomplish
Price sensitivity is context-dependent. Testing realistic prices within a complete offer is more informative than asking customers what they would like to pay.
A Quick Confidence Check
- Use plausible prices.
- Keep the offer constant.
- Include uncertainty.
- Consider margin.
- Validate behavior.
Common Questions
Can I use this guide if I am new to this?
Yes. Pricing and strategy teams exploring the range in which customer preference begins to change materially. Follow the steps in order, start with a small test, and use the final checklist before you field or report anything important.
What is the simplest way to get started?
Begin by define the offer and target customer. Next, select prices that span a plausible decision range. You do not need to perfect every setting before running a small preview or pilot.
How do I know when I am ready?
Use the confidence check above. In particular: Use plausible prices. Keep the offer constant. Include uncertainty. Consider margin. When the decision is consequential, keep your study documentation and ask a qualified colleague or methods reviewer to examine the design as well.
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