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Price Sensitivity Meter / Van Westendorp Analysis

The Van Westendorp method is used to determine consumers' estimate of reasonable pricing for a certain product, as well as for a product component.

Based on four simple questions, the method allows for identification of a price point and a price range that would ensure optimal reach among target audience. With this tool total market price sensitivity can be assessed and ideal price range for the product developed.

How it Works

Peter van Westendorp developed the model based on four questions:
  1. At what price would you consider this product to be a bargain - a great value for the money?
  2. At what price would it start to get expensive but still worth considering?
  3. At what price would it be so cheap that you would doubt the product quality?
  4. At what price would it be so expensive that you would not consider it at all?
*Some order questions from cheap to expensive.

The target price point is calculated for each respondent -the mid-point between bargain price and getting-expensive-but-worth-considering price.

An additional calculation can be made to weigh the impact of the extremes:

A follow-up short survey can be conducted asking Purchase Intent with the price point/range stated.
UTP = ((Bargain+High/Consider)/2 + (Cheap + Expensive)/2)/2

Four main findings in terms of pricing are derived:
  1. Revenue Contribution Maximization Point
  2. Indifference Price Point
  3. Optimum Price Point
  4. Range of Competitive prices
This model assumes that the consumer is aware of fair pricing for the product in question and would have reasonable expectations. If this is not the case (for example for a new product concept), a competitive price range can be introduced or a "smart" slider that allows only certain price range can be utilized.

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