Price sensitivity meter

Understanding Price Sensitivity Meter

Price Sensitivity Meter (PSM) is a tool used for determining the amount of price change that a customer is willing to accept before switching to a different product or service. It is a market research tool used to assess the price elasticity of a product or service. It measures customer’s willingness to pay at different price points and can be used to set the ideal pricing strategy.

How Does It Work?

The PSM is an interactive survey or questionnaire that asks customers to rate their willingness to pay a certain amount for a product or service. For example, customers may be asked to rate the price increase or decrease of a product on a scale of 1-10. The survey results are then used to create a price sensitivity curve, which can be used to identify the most attractive price for the product.

Benefits of Using a PSM

Using a PSM can help businesses make informed decisions about pricing. Here are some of the benefits of using a PSM:

  • Identifies the Optimal Price Point: With the help of the PSM, businesses can identify the optimal price point for their products or services. This helps them to maximize their revenues without sacrificing customer satisfaction.
  • Improves Customer Retention: By setting the right price based on customer feedback, businesses can ensure that their customers remain loyal and continue to purchase their products or services.
  • Gives Insight into Customer Preferences: By understanding customer preferences, businesses can tailor their offerings to meet customer needs and create a better customer experience.


Using a Price Sensitivity Meter is a great way to determine the ideal price for a product or service. It helps businesses identify the optimal price point, improve customer retention, and gain insight into customer preferences.References: