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    Price sensitivity: Priceline

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    1. Define price sensitivity. Provide relevant examples.
    2. What can you say about the price sensitivity of priceline's customers?
    3. What eddect would priceline's price be likely to have on the reference price cutomers bear in mind for travel and mortgage services?
    4. How does the company's lowest-cost loan guarantee affect a customer's perception of the product's value?

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    Solution Preview

    Price sensitivity is directly related to the elasticity of demand for the product. The higher the elasticity of demand for a product at a particular price the higher the price sensitiviy.
    · Price sensitivity can be calculated for every new product concept screened
    · First year sales can be estimated for every product concept and over a range of prices
    · Price/volume can be individually optimized for every product concept tested
    · New product concepts can be screened and/or completely rank ordered on consumer appeal, market share, unit volume, gross dollar volume or gross profits
    · All calculations can be done for any subset of the sample as well as the total sample

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