Pricing problems are often like potholes in winter. You know they're out there; sometimes you just find it awfully difficult to steer around them.

The same could be said for price sensitivity, either as a buyer or a seller. Sometimes you never know whether or not a potential customer will balk at your prices. But if you know more about the factors that affect price sensitivity, you might have a better shot at avoiding the subject completely. Here are ten primary factors that affect price sensitivity.

Perceived substitutes effect. Stated simply, buyers are more price sensitive the higher the product's price relative to the prices of the buyers' perceived substitutes. In other words, if a buyer knows what the prices are of your competitors and you are higher, there will be greater sensitivity to your price. Conversely, the opposite is true. For example, if you're a tourist and don't know what the prices are of some good, local Mexican restaurants in Puerto Vallarta, you won't be as price sensitive and will pay the higher prices in the "tourist trap" restaurants.
Unique value effect. Buyers are less sensitive to a product's price the more they value the unique attributes that differentiate the offering from competing products. This concept is pretty straightforward. People, for example, who are going up into the stratosphere in a MIG jet aren't as concerned about price as they are about the uniqueness of the seeing the Earth's curvature.
Switching cost effect. Buyers are less sensitive to the price of a product the greater the added cost of switching suppliers. If you have been using a tax accountant for the past 10 years who has all of your records and your business history in his or her brain, you are likely to be less sensitive to price even if lured by another less-expensive accountant.
Difficult comparison effect. Buyers are less sensitive to price of a known or reputable supplier when they have difficulty comparing alternatives. You see this in the technology industry all of the time as companies offer proprietary software or services that are difficult to compare. As a result, they often don't have to compete on price.
Price-quality effect. Buyers are less sensitive to a product's price to the extent that a higher price signals quality. Mercedes Benz has been counting on this effect for years, as it markets to a higher income clientele that is more interested in prestige than costs.
Expenditure effect. Buyers are more sensitive when the expenditure is larger, either in dollar terms or as a percentage of household income. This one makes intuitive sense. You're bound to fret over every penny of your first home purchase than the purchase of a new suit.
End-benefit effect. The more sensitive buyers are to the cost of the end-benefit, the more sensitive they will be to the price of the products that contribute to that end-benefit. If you are a small business making French pastries and your customers are sensitive to your prices, you will then be very sensitive to the price you pay for butter, flour and sugar.
Shared-cost effect. The smaller the portion of the purchase price buyers must pay themselves, the less sensitive they are. A good example of this effect is college tuition. If you're paying for it yourself, you are likely to be much more sensitive to tuition hikes than if your parents were paying for all or a portion of it.
Fairness effect. Buyers are more sensitive to a product's price when it is outside the range that they perceive it as "fair" or "reasonable" given the purchase context. If you go to a local semi-professional hockey game and the vendors are charging $10 for a soft drink, you're likely to be much more sensitive to the price because it's not reasonable.
Inventory effect. A buyer's ability to hold an inventory of a product for later use substantially increases their sensitivity to temporary price deviations from what they expect in the long run. In other words, if you own a gas station you're going to be very sensitive to immediate drops in wholesale prices if you know you might be able to sell that gas at a higher price at a later date.