All industries face price sensitivity in varying degrees and at different times. Understanding price sensitivity prepares you for negotiating better deals. By understanding this and proactively preparing for it, you gain pre-emptive selling advantage in negotiation.

Customer satisfaction, brand loyalty and customer retention are inversely related to price sensitivity. This means that satisfied, loyal customers are less focused on price. They understand and appreciate your value. You have proven yourself and the impact of your solution.

Customers who participate actively in the sale and know more about your product are less sensitive to price. This happens because engaged buyers feel a sense of control and realize they are buying, not just being sold to. It also happens because informed buyers who know more about your product understand its value. Some may argue that informed buyers are more discerning and, consequently, sharper negotiators. This is true if the buyer knows more than the seller about the product. Your best defense is a great offense—knowing your product well and educating your customer about the full-range benefits of its use defends against someone who attempts to minimize the value of your solution.

In negotiating, whoever feels the most pressure makes the most concessions. Pressure points such as timing, scarcity, availability, previous experience, the critical nature of the purchase, access to resources and the availability and ownership of funds all affect price sensitivity. The more aware you are of these issues, the stronger your negotiating position. Your challenge is to put the spotlight on these so that the buyer is aware of them, too.

Relationships displace the importance of price. The stronger the relationship, the less important the price, because of the trust bond the seller has with the buyer. This is why some large companies attempt to set up firewalls between buyers and sellers. They may use purchasing groups or consultants to prevent their buyers from becoming too close to suppliers. In this case, familiarity breeds agreement.

Buyers tend to be less price-sensitive to the niceties of life and more price sensitive to the necessities of life. When was the last time you heard someone complain about the price of a new Mercedes-Benz or a Rolex watch? People complain about the cost of energy and food.

People are more price-sensitive when spending their own money as opposed to their company's money. People spend less and are more price-sensitive when they use cash versus credit. This is one of the reasons retailers want you to use their credit cards. It's the same principle used in gambling; people attach less value to chips than they do to cash.

Price sensitivity is a reality for everyone in business. Suppliers that familiarize themselves with conditions that increase and decrease sensitivity will negotiate from positions of strength.