how to set pricing using the van westendorp price sensitivity meter
TRANSCRIPT
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How to Set Pricing Usingthe van Westendorp Price Sensitivity
Meter
By Dana Stanley, Vice President, Marketing, Survey Analytics
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DIY software for data collection, analysis and visualization.
Survey Analytics
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Old New
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Completely New(Goldfish Carrier)
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!
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?
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How Are Prices Usually
Set?
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Guessing
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Fingerin theWind
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Negotiation
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Negotiation
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Trial and Error
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Fear
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Pricing Surveys
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What Price Would You Be Willing to Pay for ________?
The “Willingness to Pay” Question
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Too Blunt
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Too BluntLowballing
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X
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A Range
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$20.00?
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$20.00?
$2.79
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Priced too High Lost Sales
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$100.00?
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$100.00?
$1,200.00
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Priced too Low
Lost Profits
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TooHigh
TooLow
LostSales
LostProfit
s
AcceptablePrice Range
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Van Westendorp,
P (1976) "NSS-Price Sensitivity
Meter (PSM)- A new
approach to study
consumer perception of price."
Proceedings of the
ESOMAR Congress.
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TooHigh
TooLow
LostSales
LostProfit
s
AcceptablePrice Range
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High
Low
• Too Expensive• Expensive
• Bargain• Too Cheap
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High
Low
• Too Expensive• Expensive
• Bargain• Too Cheap
Price Signals Quality
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Too Expensive
At what price would you consider _________ to be so expensive that you would
not consider buying it?
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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?
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Bargain
At what price would you consider _________ to be a
bargain, a great buy for the money?
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Too Cheap
At what price would you consider _________ to be
priced so low that you would feel the quality couldn’t be
very good?
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$1,799
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Ordinal Validation
For each respondent
Bounding logic
or post hoc data
cleaning
Higher
Lower
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Plot Cumulative Percentages
Cumulative(Too
Expensive)
InverseCumulative
(Not Expensive)
InverseCumulative
(Not a Bargain)
Cumulative(Too Cheap)
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X-Axis: Cumulative Proportion
Y-Axis: Price
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Point ofMarginal
Cheapness (PMC)
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Point ofMarginal
Cheapness (PMC)
Point ofMarginal
Expensiveness (PME)
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Point ofMarginal
Cheapness (PMC)
Point ofMarginal
Expensiveness (PME)
Range ofAcceptable
Prices
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Point ofMarginal
Cheapness (PMC)
Point ofMarginal
Expensiveness (PME)
Range ofAcceptable
Prices
Optimal Price Point
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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.
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By Product, By Target Group
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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
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