What is price sensitivity?
Here’s what you need to know about price sensitivity. If the target client is very price sensitive, then sales will drop as the price increases. Think about paper towels or toilet paper, and the target client there. This would be price elastic. If you raise your prices by just 10 or 20 cents, you run the risk of losing that sale. They’re going to go to the cheapest thing, right? It’s going to follow their value.
On the flip side, if the target client is not price sensitive, then sales will not decrease significantly as the price increases. The more substitutes or product or service has, the more price elastic it is, meaning that the target client is more sensitive to a fluctuation in price.
Let’s digest this. There’s a ton of toilet paper makers. There’s a ton of potato chip makers. There’s a ton of paper towel makers out there. The more companies there are making the same product, the more price elastic it will be, meaning that consumers are going to be very sensitive to that product’s price as it fluctuates up and down.
What makes a product price inelastic?
As the number of competitors and the number of substitute products go down, the price starts becoming less elastic. It’s actually said to be price inelastic. This means that because there’s no substitute, consumers will be less sensitive to the price of it going up. Luxury items are typically items where there’s no substitute, so they’re usually price inelastic. This is the space where I think most photographers want to be. That boutique, luxury experience, heirloom products, even your unique style of photography all contribute to the perception that there is no other photographer that can offer what you do. This makes it easier to charge the prices you want to charge and not get caught in a race to the bottom.