Exploring Van Westendorp Pricing

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What is Van Westendorp?

Since its introduction in the 1970s, the Van Westendorp Price Sensitivity Meter has been a popular pricing methodology used in market research. Instead of simply asking consumers to identify a dollar (or other currency) amount, this experiment evaluates a range of acceptable prices for your product and offers an optimal price point. It does this by asking four key questions: “At what price would you begin to consider the product so inexpensive that you would question the quality and not purchase it? "
"At what price would you think the product is a bargain?"
"At what price would you say this product is starting to become expensive, to the point that you’d have to give some thought to buying it? "
"At what price would you consider the product to be so expensive that you wouldn’t consider buying it?” While the questions themselves are quite simple, the output is powerful. After running a study, the visualization will reveal an acceptable range of prices (highlighted in green in the visualization below). **
** This range of prices is end-capped by the point of marginal cheapness (PMC) on the left and the point of marginal expensiveness (PME) on the right. If you price your offering any lower than the PMC, shoppers will likely find your product too cheap and question the quality. Similarly, shoppers will likely consider any price above the PME to be too expensive. But that’s not all it will show you. Directly in the center, you will see the intersection of the “too cheap” and “too expensive” lines. This is your optimal price point. What makes it optimal? It minimizes the number of people who are dissatisfied with your price one way or the other. While there are many pricing methodologies to choose from, we recommend using a Van Westendorp for your pricing if: You don’t have a price range for your offering and would like to explore your options.
You would prefer to run a simpler study that will yield straightforward results.

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Using Van Westendorp with SightX

With SightX, gauging price sensitivity and solidifying an optimal pricing strategy is simple. After creating a new project, you’ll start in the BUILD section. There you can select “Van Westendorp Pricing” from the add item menu. The experiment will immediately populate, giving you space to add a description and image of your product or service. You can also set a currency and minimum and maximum prices if you have them. Below, you’ll find the study. The first question we suggest is a purchase intent screener. This question allows you to disqualify respondents who have little or no intent to purchase your product. From there, the four Van Westendorp questions are pre-filled and set for launch. You’ll just want to include a welcome page and some demographic questions. After you’ve fielded your survey and gotten the results, you’ll see something like the graph below. The green box in the center of the graph highlights the range of acceptable prices. On the left, you’ll see a red dot that indicates the point of marginal cheapness (PMC). On the right, you’ll see a green dot indicating the point of marginal expensiveness. And directly in the center of highlighted area is your optimal price- also displayed to the right of the graph. Here are in-depth definitions of the elements of a Van Westendorp pricing chart, which can help you interpret the results of your pricing study:

• Too Expensive Line: line plotting responses to the question “At what price would you begin to think the item is too expensive to consider?” with the dollar amount on the X axis and the percent of respondents who entered that dollar amount on the Y axis.
• Expensive Line: line plotting responses to the question “At what price would you think the item is getting expensive, but you still might consider it?” with the dollar amount on the X axis and the percent of respondents who entered that dollar amount on the Y axis.
• Bargain Line: line plotting responses to the question “At what price would you think the item is a bargain, a great buy for the money?” with the dollar amount on the X axis and the percent of respondents who entered that dollar amount on the Y axis.
• Too Cheap Line: line plotting responses to the question “At what price would you begin to think the item is so inexpensive that you would not buy it because it would be poor quality?” with the dollar amount on the X axis and the percent of respondents who entered that dollar amount on the Y axis.
• Indifference Price Point (IPP): the price at which the product is starting to become expensive but still within consideration.
• Point of Marginal Cheapness (PMC): the lowest you can price the product; any lower and shoppers will begin to consider the product too cheap.
• Optimal Price Point (OPP): the ideal price point for the product.
• Point of Marginal Expensiveness (PME): the highest you can price the item; any higher and shoppers will begin to consider the product too expensive.
• Range of Acceptable Prices: this is the range of prices you could use for your product; the bottom range is the PMC and the top range is the PME.

Here are some best practices when building a top-performing Van Westendorp pricing study:

• Use the Purchase Intent question provided or create your own earlier in the survey when setting up a Van Westendorp exercise. In most cases, since the Van Westendorp exercise will assess respondents’ willingness to pay for your product, you will want to only ask people who are likely to purchase your product to assess its price.
  • Only display the Van Westendorp exercise to those who are likely to purchase your product. Asking respondents who are unlikely to purchase your product to complete a Van Westendorp exercise could yield skewed results since people who are unlikely to purchase a product might devalue it in comparison to those who would purchase it. If your intention is to see how people who would purchase the product price it in comparison to those who wouldn’t purchase it, then you will want to include everyone in the Van Westendorp exercise, regardless of purchase intent.
• Minimize outliers by setting a minimum and maximum price.
• For robust results, we recommend a minimum base size of 100. Results with fewer than 100 completes are directional.