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Glossary > Price Sensitivity
Price sensitivity refers to the degree to which customers are responsive to changes in the price of a product or service. It measures how much a customer’s demand for a product or service changes when the price is increased or decreased. Price sensitivity is an important concept in the SaaS industry, as it can help SaaS companies optimize their pricing strategy and increase revenue.
If customers are highly price-sensitive, then a small change in price could result in a significant change in demand. On the other hand, if customers are relatively insensitive to price changes, then a company may be able to increase its prices without losing customers. To measure price sensitivity in the SaaS industry, companies can use various methods such as surveys, focus groups, or A/B testing. A SaaS company may test different price points for their product and measure the change in demand to determine the price sensitivity of their customers.
Once a SaaS company has determined the price sensitivity of its customers, it can use this information to develop a pricing strategy that maximizes revenue.
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