Question

Pick a product category and explain the factors that affect the price sensitivity of the customers? Considering the brands of the product category that you choose, what is the impact of the brand image on the price sensitivity of the customers? Answer must be four paragraphs

Answer 1

Price Sensitivity: Price sensitivity is a term that is defined in Economics subject. In economics, it is measured in terms of Price elasticity of demand. Price sensitivity is the degree at which the demand changes if the price of the product changes. Price sensitivity is important to understand the purchasing power of consumers when the price of the product changes.

People who are more sensitive to the price, purchase more when the price of the product decreases and reduce purchasing of the product when the price of the product increases.

On the other side, when people are less sensitive to price because they prefer the quality of the product than the price of the product, so the price is not an important criterion that affects their purchasing power for a particular product.

We will choose the Android Smartphone category to understand the price sensitivity for mobile phones.

Factors affecting price sensitivity:

The Android Smartphone market is a price elastic market where consumer's purchasing power will be affected when price changes of smartphones. Consumers tend to switch from one brand to another when prices and other factors changes, there is no brand loyalty available in the android smartphone category Because android is an operating system and every manufacturer is using it in their smartphone and consumer can get almost same functions in each brand so the price is a prime factor when consumer want to switch from one brand to another.

There are various factors that affect the price sensitivity of the product, we will discuss these factors in the below points:

a. Convenience Effect: The smartphone is not only used for talking to another person but today smartphones can do the same things that a computer can do. The smartphone makes the consumer more comfortable doing tasks and finishing their day to day work. Today almost everyone is using smartphone and users of the android smartphone is higher than iPhone. People tend to buy a smartphone when they see a price change in the android smartphone. People will wait for price reduction and this happens, people will buy their smartphone.

b. Product feature effect: Product feature is one of the important features to attract consumers for the smartphone market. The built quality of the smartphone, camera features, audio, and video functions are the factors that affect the demand of the smartphone. Consumers are more price-sensitive for smartphones so any smartphone may provide better features but consumer tends to buy a cheaper product that provides the same or almost the same features in smartphones.

c. Social influence factor: This is one of another factor that affect the sensitivity of the smartphone. Consumer seeks help in buying decision when they want to purchase a smartphone, they will ask opinions from friends, family members, and other society members. So social influencing also affects the purchasing power of the consumer and will tend to buy a product that is suggested by the social groups.

d. Branding factors: Brand is one of the important factors that affect the decision making of a consumer for a smartphone. There are various brands available in the market for smartphones. Some brands have costly smartphones but with a lot of features but there are brands that provide economical value with a good amount of features at a cheaper rate. Consumers tend to buy products from brands that are cheaper when they are price sensitive. They are always looking to buy the branded smartphone at the time of festive and occasional sales, when the price decreases, consumers will buy their favorite branded smartphone.

Brand Image also affects the price sensitivity in the smartphone market. Consumers are willing to pay a little higher price for branded products that a similar kind of products with no brand image. A branded smartphone can provide the best quality and unique application features and also the customer service will be great. So the consumers are ready to pay little higher prices for branded smartphone than the smiliar kind of smarphone with lesser brand image. When the price of branded smartphone decreases little, the demand of that brand will increase in multiple times. People seems to waiting for price reduction everytime, when they find the opportunitty to buy the branded product a little lesser price, they will buy the product.