How to Set Pricing Usingthe van Westendorp Price Sensitivity

Meter

By Dana Stanley, Vice President, Marketing, Survey Analytics

DIY software for data collection, analysis and visualization.

Survey Analytics

Old New

Completely New(Goldfish Carrier)

!

?

How Are Prices Usually

Set?

Guessing

Fingerin theWind

Negotiation

Negotiation

Trial and Error

Fear

Pricing Surveys

What Price Would You Be Willing to Pay for ________?

The “Willingness to Pay” Question

Too Blunt

Too BluntLowballing

X

A Range

$20.00?

$20.00?

$2.79

Priced too High Lost Sales

$100.00?

$100.00?

$1,200.00

Priced too Low

Lost Profits

TooHigh

TooLow

LostSales

LostProfit

s

AcceptablePrice Range

Van Westendorp,

P (1976) "NSS-Price Sensitivity

Meter (PSM)- A new

approach to study

consumer perception of price."

Proceedings of the

ESOMAR Congress.

TooHigh

TooLow

LostSales

LostProfit

s

AcceptablePrice Range

High

Low

• Too Expensive• Expensive

• Bargain• Too Cheap

High

Low

• Too Expensive• Expensive

• Bargain• Too Cheap

Price Signals Quality

Too Expensive

At what price would you consider _________ to be so expensive that you would

not consider buying it?

Expensive

At what price would you consider _________ starting to

get expensive, so that it is not out of the question, but

you would have to give some thought to buying it?

Bargain

At what price would you consider _________ to be a

bargain, a great buy for the money?

Too Cheap

At what price would you consider _________ to be

priced so low that you would feel the quality couldn’t be

very good?

$1,799

Ordinal Validation

For each respondent

Bounding logic

or post hoc data

cleaning

Higher

Lower

Plot Cumulative Percentages

Cumulative(Too

Expensive)

InverseCumulative

(Not Expensive)

InverseCumulative

(Not a Bargain)

Cumulative(Too Cheap)

X-Axis: Cumulative Proportion

Y-Axis: Price

Point ofMarginal

Cheapness (PMC)

Point ofMarginal

Cheapness (PMC)

Point ofMarginal

Expensiveness (PME)

Point ofMarginal

Cheapness (PMC)

Point ofMarginal

Expensiveness (PME)

Range ofAcceptable

Prices

Point ofMarginal

Cheapness (PMC)

Point ofMarginal

Expensiveness (PME)

Range ofAcceptable

Prices

Optimal Price Point

Other Options

Measure purchase intent at key price levels uncovered by Van Westendorp analysis.

Combine with profitability data to determine optimal revenue point.

Box-plot of each of the 4 questions for alternate visualization.

By Product, By Target Group

Criticisms and Limitations

• Assumption of rationality

• Does not account for competition

• Lowballing

• Not used in conjunction with other techniques

• Appears more precise than it really is

Any Questions?

Use the GoToWebinar Control Panel

dana.stanley@surveyanalytics.com

http://surveyanalytics.com

Contact us with anyquestions after the webinar.

Thank you!