The document explains the Van Westendorp Price Sensitivity Meter, a method for determining consumer perceptions of price and setting acceptable pricing ranges. It outlines the key questions to ask consumers to gauge their willingness to pay and emphasizes the importance of combining this analysis with profitability data for optimal pricing strategies. Limitations of the method, such as assumptions of rationality and competition, are also discussed.

1. How to Set Pricing Using
the van Westendorp Price Sensitivity Meter
By Dana Stanley, Vice President, Marketing, Survey Analytics

2. Survey Analytics
DIY software for data collection, analysis and visualization.

9. Old New

10. Completely New
(Goldfish Carrier)

15. How Are
Prices
Usually Set?

16. Guessing

17. Finger
in the
Wind

18. Negotiation

19. Negotiation

20. Trial and Error

21. Fear

22. Pricing Surveys

23. What Price
Would You Be
Willing to Pay
for ________?
The “Willingness
to Pay” Question

24. Too Blunt

25. Too Blunt
Lowballing

28. A Range

29. $20.00?

30. $20.00?
$2.79

31. Priced too High Lost Sales

32. $100.00?

33. $100.00?
$1,200.00

34. Priced too Low
Lost Profits

35. Too Lost
High Sales
Acceptable
Price Range
Too Lost
Low Profits

37. Van
Westendorp, P
(1976) "NSS-
Price Sensitivity
Meter (PSM)- A
new approach
to study
consumer
perception of
price."
Proceedings of
the ESOMAR
Congress.

38. Too Lost
High Sales
Acceptable
Price Range
Too Lost
Low Profits

39. • Too Expensive
High • Expensive
• Bargain
Low • Too Cheap

40. • Too Expensive
High • Expensive
Price
Signals
Quality
• Bargain
Low • Too Cheap

42. Too Expensive
At what price would you
consider _________ to be so
expensive that you would not
consider buying it?

43. 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?

44. Bargain
At what price would you
consider _________ to be a
bargain, a great buy for the
money?

45. Too Cheap
At what price would you
consider _________ to be
priced so low that you would
feel the quality couldn’t be
very good?

52. $1,799

62. Higher
Ordinal
Validation
For each
respondent
Bounding logic
or post hoc
data cleaning
Lower

63. Plot Cumulative
Cumulative (Too Expensive)
Percentages
Inverse
Cumulative
(Not Expensive)
Inverse
Cumulative
(Not a Bargain)
Cumulative
(Too Cheap)

64. X-Axis: Cumulative Proportion
Y-Axis: Price

66. Point of
Marginal
Cheapness
(PMC)

67. Point of
Point of
Marginal
Marginal
Cheapness
Expensiveness
(PMC)
(PME)

68. Range of
Acceptable
Prices
Point of
Point of
Marginal
Marginal
Cheapness
Expensiveness
(PMC)
(PME)

69. Range of
Acceptable
Prices
Point of
Point of
Marginal
Marginal
Cheapness
Expensiveness
(PMC)
(PME)
Optimal Price Point

70. 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.

72. By Product, By Target Group

73. 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

74. Any Questions?
Use the GoToWebinar Control Panel
dana.stanley@surveyanalytics.com
http://surveyanalytics.com
Contact us with any
questions after the webinar.
Thank you!