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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:
- At what price would you consider this product to be a
bargain - a great value for the money?
- At what price would it start to get expensive but still
worth considering?
- At what price would it be so cheap that you would doubt
the product quality?
- 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:
- Revenue Contribution Maximization Point
- Indifference Price Point
- Optimum Price Point
- 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.
Contact BG Key Analytics
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