how to set pricing using the van westendorp price sensitivity meter
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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!
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