Van Westendorp's Price Sensitivity Meter

Understanding respondents perception of price

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Updated at October 18th, 2019

This tutorial shows how to create a Van Westendorp price sensitivity chart in Protobi by using the cumulative line chart:


Background

The Van Westendorp Price Sensitivity Meter (PSM) is used in market research to summarize stated consumer price preferences. This analysis allows product managers to see the intersection between prices customers say are reasonable (they would likely purchase the product or service) and prices that they say are expensive (they would no longer be willing to pay, or "fall off").

Below is an example chart from the original article showing the four cumulative curves and highlighting the intersections:

Methodology

In order to gauge customers willingness to pay participants are asked "At what price do you think the product/service ..."

  • "is priced so low that it makes you question its quality?" (too cheap)
  • "is a bargain?" (good value)
  • "begins to seem expensive?" (expensive but would consider)
  • "is too expensive?" (too expensive)

The responses to each of these questions are plotted. The intersection of these questions at certain points can give marketers and analysts information on respondents perception of price.

Van Westendorp analysis identifies four intersections:

  • OPS "Optimal Price:" Too cheap and too expensive to consider intersect
  • IDP "Indifference Price:" Good value and expensive but would consider intersect
  • MGP "Marginal Point (cheap):" Too cheap and expensive but would consider intersect
  • MDP "Marginal Point (expensive):" Good value and too expensive to consider intersect

According to this methodology, the "Range of acceptable prices" is from MGP to MDP.

Create a Van Westendorp plot in Protobi

Identify the four questions in your survey corresponding to the four pricing questions and put them into a single group:


Press the edit icon for the group and from the context menu select "Chart type...." In the chart dialog choose the cumulative line chart and show the legend:


We now have the cumulative distribution for the four questions in a single chart:


Now we need to reverse two of the lines so they are descending. Press the edit icon and from the context menu choose "Edit JSON...". In this dialog, add a new special attribute "reverse" and specify the keys corresponding to "Too cheap" and "Good value":


Voilá! You now have a Van Westendorp chart:


You can hover over the intersections to get the corresponding prices:


It is possible to extend this analysis as well as implement other pricing visualizations in Protobi. Contact Protobi support to discuss your project.




Source: VanWestendorp, P. (1976), “NSS-Price Sensitivity Meter (PSM) – a new approach to study consumer perception of price,” Proceedings of the ESOMAR Congress, Venice. https://rwconnect.esomar.org/a-new-approach-to-study-consumer-perception-of-price

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