Short answer: price sensitivity analysis tells you how much demand changes when price changes, so you can set prices with evidence instead of instinct. Because price flows straight to profit, small improvements matter: for a company with a 10% operating margin, a 1% price increase with no loss of volume lifts operating profit by about 10%. The analysis shows where you have room to raise prices, and where you do not.
Methods, from simple to advanced
| Method | How it works | Best for |
|---|---|---|
| Historical analysis | Compare past price changes with volume, win rates and churn | Companies with pricing history |
| Van Westendorp survey | Asks customers at what prices a product feels too cheap, a bargain, getting expensive and too expensive | Finding an acceptable price range |
| Gabor-Granger survey | Asks willingness to buy at a series of prices | Estimating a demand curve |
| Conjoint analysis | Customers choose between packages with different features and prices | Packaging and feature-based pricing |
| Live tests | Test different prices with comparable customer groups | High-volume or online sales |
A practical five-step approach
- Segment customers by size, need and value received.
- Know your margins by product and customer.
- Gather evidence using the methods above that fit your business.
- Model scenarios: revenue and profit at different price and volume outcomes.
- Roll out and measure win rates, churn and margin by segment.
Mistakes to avoid
- One price change for every customer
- Ignoring discounting, which quietly undoes list price increases
- Testing without a clear measure of success
- Pricing on cost alone instead of value
Frequently asked questions
How often should we review pricing?
At least once a year, and whenever costs, competitors or your product change significantly.
Do we need a survey firm?
Not always. Historical data and structured customer conversations go a long way for most B2B companies.
What if customers push back?
Lead with the value you deliver, give notice and consider phasing increases for long-standing customers.
Rethinking your pricing? See how to raise prices without losing customers or book a call with our CFO team.