Value Based Product Pricing: Van Westendorp’s Price Sensitivity Meter

How is it used?

Potential customers are chosen as respondents to a survey having primarily four questions about the price of any product.

Using the Van Westendorp Price Sensivity Meter

Product Details: WFC — Smart Chairs to Work from Home. WFC chairs have the following attributes and couple of differentiators when compared to the existing brands in the market -

Questions in the Survey
Survey Response
Frequencies of each distinct value in each category

Idea Behind Table 3

Bargain & Too Cheap

Percentage of respondents for each value in each category

Findings

The left-most intersection (Too cheap and Worth.It lines) is the Point of Marginal Cheapness; and the right-most intersection, (Bargain and Too Expensive) defines the Point of Marginal Expensiveness.

Limitations

Customers can’t be trusted to behave in an identical manner while responding to a survey and making a purchase. The method doesn’t take into account the cost and required margins and hence has its limitations. Also, in case of a radically new product, customers may not have any idea about the price points or value of the product. As such, the method is only meant to give a directional input on the price range that a customer is willing to pay for your product and should be considered together with all the other variables in the pricing equation.

Table 1 and 2
Tables 1, 2, 3 | Table 3 with Bargain value selected.
Tables 1, 2, 3 | Table 3 with Worth.It value selected.

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Abhishek Jha

Abhishek Jha

Product Manager at Lowe’s. Writing about products, literature, and life.