Comments on: Van Westendorp pricing (the Price Sensitivity Meter)

By: Mike

Mike — Fri, 25 Jun 2010 23:32:55 +0000

Hi Mark. Thanks for your interest. There are a couple of different ways to come up with demand/revenue curves. I’ll do an update or a new post shortly.
Mike

By: Mark

Mark — Thu, 24 Jun 2010 13:18:10 +0000

Hi Mike,
I was wondering if you could expand a bit on how to analyze/model the “going beyond” questions — if you use the two additional questions on likelihood to purchase — the bargain and getting expensive price points? Do you just use the price point they are most likely to purchase at (it would be the bargain price almost all the time wouldn’t it) or do you average the 2 price points when plotting the demand/revenue curves? Thanks for any guidance you can provide!

By: Market research for startups

Market research for startups — Wed, 19 May 2010 12:44:20 +0000

[...] analysis because it is easy to implement, analyze and explain, and of course useful! My article (http://www.5circles.com/wordpress/blog/2009/05/van-westendorp-pricing-the-price-sensitivity-meter/mi...) includes a comparison of other pricing approaches including why you shouldn’t just ask “what [...]

By: Mike

Mike — Mon, 22 Mar 2010 23:36:25 +0000

Don’t be too hard on yourself Mark. Although the concept behind Van Westendorp is simple, it seems that it is also easy to make mistakes with the plots.

I’m glad you got it figured out.

Mike

By: Mark

Mark — Thu, 18 Mar 2010 19:57:14 +0000

I found the problem and it is me. I got wildly different results because I screwed up two of the cumulative distributions in a way that is too complex to explain and would embarrass me even more than I already am. At least the problem is solved and whatever faith in the model we have has been restored.

By: Mike

Mike — Tue, 09 Mar 2010 04:14:14 +0000

Hi Mark, interesting results. Can you give more details on the ranges of values you got? How did the results vary?

I can imagine that there would be some differences if the product/service should be priced close to the increments. In other words, if the fair price is $2.50 say, you might have spiky results. That would be similar to any situation where there is a threshold and there are big jumps in that area. If there isn’t anything like that, I’m not sure what could be the cause.

Mike

By: Mark

Mark — Sat, 13 Feb 2010 19:33:19 +0000

I ran the model two ways. The first way, I broke the prices into increments of $1.50. The second way, I broke the prices into increments of $.25. I got wildly different results, based on how I grouped the prices. I checked and double-checked that I did everything correctly. Have you ever seen this before? It just doesn’t make sense that this would happen.

n = 306 consumers

By: Anna

Anna — Wed, 20 Jan 2010 04:53:24 +0000

Mike, couple of follow up questions:

1. Why is cumulative frequency used in this method?
2. What if vocalisation reveals that the results don’t make sense intuitively – do we reject the research outcomes? What flaw does it point to?

By: Mike

Mike — Wed, 20 Jan 2010 04:47:47 +0000

Anna, thanks for your interest.

Van Westendorp is a price optimization technique. The point where the Too Expensive and Too Cheap curves cross is called the point of marginal cheapness. This is where the fewest people will not buy because they consider the product too expensive or too cheap. So the maximum volume of product will be sold at this point. I usually place less emphasis on this point because it looks as if it gives a more precise result than the data generally supports – especially for products that are not all that mature or well-defined. However, it serves to illustrate the reason why the cumulative plots are valuable. To look at it another way, using the vocalization examples, at $300 only 5% think it is too cheap. But at $35, 40% think it is too cheap. The 40% who think $35 is too cheap includes the 5% who thought $300 too cheap.

The vocalization doesn’t cast doubt on the research results, it merely makes sure that you have plotted the curves correctly, and that you are comfortable talking about them in front of management and clients. If the results don’t make sense intuitively, that probably means that the respondents don’t understand the product well enough. Perhaps it is too new for them to appreciate the value proposition, or perhaps the information provided in the survey wasn’t adequate.

I hope this helps.
Mike

By: Mike Pritchard (That Research Guy)

Mike Pritchard (That Research Guy) — Sun, 31 May 2009 23:08:33 +0000

I’m glad you found the article helpful Vetri. Let me know if there are other survey or research topics you’d like covered.