How to use the Van Westendorp Price Sensitivity Meter

The dilemma is familiar to most retailers: how do you change your prices without putting customers off your product? Raise prices too high, and customers might think they're not getting value for their money. Drop them too low, and they might think the product is cheaply made. What, then, is the range of acceptable prices for a given product?

The good news: there's a simple methodology for identifying the optimal price point for your product, along with its upper and lower limits. You can find your optimal price with Price Optimization from SurveyMonkey LaunchPad, without doing a single calculation yourself.

Originally developed by Dutch economist Peter Van Westendorp in 1976, the Van Westendorp Price Sensitivity Meter is a simple but powerful pricing model that identifies the series of price points that are psychologically critical to your audience. It's a series of survey questions that captures your customers' price sensitivity, purchasing power, and thought process, and crucially, how much they're willing to pay for a specific product.

The Van Westendorp questions capture customer interest as price rises or falls, helping you pinpoint the optimal price point for your product or service. Over the past three decades, the model has become one of the most popular and widely used pricing strategy techniques in the market research industry.

There are three main scenarios where a Van Westendorp analysis is especially useful.

Even without a major change planned, like a launch or a feature swap, a Van Westendorp analysis can surface valuable insight into increasing sales or reaching profit goals.

Van Westendorp is simple to execute despite its powerful insights. It consists of four predetermined questions that collect data on price perceptions in an unbiased way. Unlike other price sensitivity analyses, this approach evaluates a range of prices in one pass, saving time while yielding actionable insight.

The four questions asked in the Van Westendorp Price Sensitivity Meter are:

For any specific product, even one that's already low-priced, customers usually hold a floor price, or lowest acceptable price, in mind. Drop your price below this level, and customers' suspicions about quality will be piqued. This question identifies the price at which customers think your product is too cheap.

Some customers are more deal-prone than others. This question pinpoints the price at which customers believe they're getting a great deal, valuable information if you're already tracking competitors' prices and want a price advantage.

This question identifies upper price points that are still viable, but that might need careful advertising and promotion to convert interest into sales.

The final question helps you discover the ceiling price for your product, the price above which sales are likely to drop off sharply.

A brief survey using the SurveyMonkey pre-built Van Westendorp template can be administered to a target audience in minutes, and you can customize the questions to fit your needs.

If your product is very new and you have little knowledge of consumer price perceptions, an open-ended approach, where respondents enter any price they see fit, often works well.

If you already have a sense of your acceptable price range, a scale capturing both ends of that range works instead.

If your product hasn't launched yet, add images or video so respondents understand what they're evaluating. The data from respondents can then be analyzed quickly using the SurveyMonkey analytics built into your dashboard.

By identifying the price points consumers perceive as too expensive, expensive, cheap or good value, or too cheap, the Van Westendorp Price Sensitivity Meter generates an acceptable range of prices for your target market. It's common to plot all four data points onto a price map, where the x-axis displays prices and the y-axis represents the cumulative percentage of respondents who selected each price point.

To plot a price map:

Interpreting where these curves intersect reveals the range of prices acceptable to your market, and an accurate estimate of your ideal price. There are four price points worth particular attention: the point of marginal cheapness, the point of marginal expensiveness, the range of acceptable pricing, and the indifference price point.

The point of marginal cheapness is the price at which you risk losing most sales because customers perceive the product as low quality. It's found where the Q1 (Too Cheap) data points intersect with the inverse of Q2 (Cheap/Good Value). Some customers may still buy below this point, but the sales gained from deal-seekers are outweighed by the sales lost from quality concerns.

The point of marginal expensiveness is the price above which customers begin to lose interest in buying. It's found where Q2 (Cheap/Good Value) and Q4 (Too Expensive) intersect. Above this point, most customers feel the product is too expensive relative to the value they get from it.

The point of marginal cheapness and the point of marginal expensiveness represent the upper and lower limits customers are willing to tolerate. Together, they define the range of acceptable pricing.

The indifference price point is where the proportion of customers who think the price is too expensive equals the proportion who think it's a bargain. At this point, most customers are indifferent to price, and it's commonly interpreted as the normal price for your product. Price below this point and you risk losing revenue; price above it and sales tend to decline.

The indifference price point is one possible price for your product, but not necessarily the best one. At the optimal price point, an equal percentage of respondents believe the price is too expensive or too cheap. This is the sweet spot, where the maximum number of respondents find the price acceptable and resistance to minor price changes is minimized, making it the best possible price for your product.

In an illustrative example from the LaunchPad Price Optimization solution's own chart, a Van Westendorp study can return an optimal price point of $10 that sits inside an acceptable range of $8 to $12, the kind of result this framework is meant to produce once your survey data comes in.

The Van Westendorp pricing model isn't the only survey-based approach to pricing. Here's how it compares to the other two most common methods.

The Van Westendorp model isn't the only way to capture price sensitivity, so why is it so popular? It has many advantages and very few limitations.

With the Van Westendorp approach, you don't need to spend time on survey development, since the four questions are already written for you. Using a ready-made template, you can be ready to capture customer price perceptions in minutes.

Customers usually provide accurate insight into their perceptions of your prices, which is what makes this analysis powerful. That said, accurate price perceptions assume respondents understand your product and the broader competitive landscape; data from unfamiliar respondents will be less useful. That's why it's vital to survey a known, highly targeted audience through a tool like SurveyMonkey Audience.

Your products and services likely target more than one market segment. The Van Westendorp survey questions can be combined with demographic or other data to find optimal price points for each segment.

You can extend the standard questions further by asking respondents to elaborate on their reasoning, or by adding a supplementary purchase-intent question after each main question, such as "How likely are you to purchase the product at this price?"

Dividing the number of people who say they're likely to buy by the total number of respondents lets you translate the survey data into demand forecasts at key price points.

If that sounds too complex to run yourself, the SurveyMonkey market research team can conduct a pricing analysis on your behalf, using a tailored, real-life audience to help narrow down the best possible price for your product.

The Van Westendorp pricing model, also called the Van Westendorp Price Sensitivity Meter, is a survey-based pricing method developed in 1976 that uses four standard questions to identify the price points customers perceive as too cheap, a good value, expensive, and too expensive, producing an acceptable price range and an optimal price point.

A price sensitivity meter is a survey tool that measures how sensitive customers are to changes in a product's price, most commonly referring to the Van Westendorp Price Sensitivity Meter and its four-question format.

The Van Westendorp questions are four standard survey questions asking respondents at what price a product feels too cheap, like a bargain, expensive, or too expensive, with the answers used to plot an acceptable price range and an optimal price point.

Yes. Despite being developed in 1976, the Van Westendorp Price Sensitivity Meter remains one of the most widely used pricing research techniques because it's quick to field, requires no complex statistical modeling to interpret at a basic level, and produces a defensible price range directly from customer responses.

Price Optimization from SurveyMonkey LaunchPad runs a Van Westendorp price sensitivity study and hands back your ideal price point or range automatically, so your next pricing decision is backed by data instead of guesswork.

You also don't have to do it alone. The SurveyMonkey Market Research Services team includes researchers who work with this methodology every day and can design, field, and interpret the study for you.