Van Westendorp Price Sensitivity Meter
Determining the best price for product or a service is a very common marketing research question. I start my conversation with a customer asking whether their merchandise has all its features set or if they also have to test a vast range of features other than price. If they're testing variable features in addition to price, we start to speak about conjoint (see below for a video on the current state of affairs in conjoint). Nevertheless, if they inform me that their merchandise features are put plus they only wish to look at price, one of the things we’ll likely discuss is the Van Westendorp Price Sensitivity Meter (let’s just call it VW).
They'd like to look like they're buying product that priced, if not a bargain, when price customers spend, reveals Conjoint.ly. To lure these shoppers you need a combination of automation and intelligence - a market intelligence solution that is good.
Here are a few ways you re-evaluate your marketing and advertising methods to enhance sales and can depend on a solution for information. Take a leaf from this fairy tale, Goldilocks and this Three Bears, if you wish to receive your pricing right. Goldilocks was a girl who didn't think for her, in extremes, everything had to be right. She didn't eat porridge that was overly cold or too hot, and nor did she deign to sit down on a seat that was too little or too large. Just like Goldilocks, you need to make sure your price is high that your products are seen as quality, and yet not so that customers turn to your opponents.
Compare your costs against your competitors using a tool and create a pricing strategy that is smart. A strategy does not mean that costs should be slashed by you or offer discount rates to pull price conscious clients. Monitor your opponents daily to check if you're overpricing, but don't consider under-pricing. The latter won't just eat into your profit margins, but can also generate a perception of low quality. Your price should be competitive and convincing enough to lead the competition, drive earnings and generate better margins. For optimum results, use a solution that offers accurate and up-to date intelligence.
The volatility of the marketplace is such that you'll have to continuously be in search of changes. Time is important with regards to revising your strategies, particularly in case of promotions. Beginning a promotion strategy later than your opponents translates into significant losses for you. A solution intelligent enough may help you design a timely promotion strategy by monitoring your discount rates against the competition. Up-to date intelligence enables you to make snap decisions which might have great impact on your company. Even the sensible ones, are willing to make a purchase, but the item is either not accessible or out-of stock. If you don't have the right stock at the right time, you're losing out on revenue and giving clients the impression of mismanagement.
I was lately corresponding with a colleague and the discussions led me to look back in the original VW paper (Peter H. van Westendorp (1976), “NSS -- Price Sensitivity Meter (PSM) -- A New Approach to Consumer Perception of Prices,” at Venice Congress Main Sessions. Amsterdam: European Marketing Research Society (ESOMAR), 139167.) In my conversations with Dave, one of the problems that arose was the way many contemporary researchers figure out the purpose of cheapness. Are researchers incorrectly calculating VW’s outputs? What would van Westendorp himself say about it? How about a little history before going into this stage?
The Questions In the VW technique, Respondents are asked 4 key questions related to their price anticipation for a service or product! Price where product/service will be a bargain Price where it would start to get pricey Price where it would be so inexpensive that calibre will be doubted Price where it is too pricey to consider These 4 questions are often referred to as: “cheap”, “pricey”, “too cheap”& “too pricey”.
What's the Output? VW gives us two “central” points: The indifference price tag (IDP). Represents the (median) “normal” price in the market or the price of a market leader. The Perfect price tag (OPP) The “spot” where the number of those who find the price acceptable is maximized, and resistance to price changes is minimized
And top and bottom “array� numbers: The purpose of marginal cheapness (MGP). Marks the low end of the Selection of acceptable prices The purpose of marginal expensiveness (MDP). Marks the high end of the Selection of acceptable prices
How Do I Get the Lines to Cross? The costly and too costly lines represent increasing cumulative frequency as price increases (i.e., the higher the price goes, the more people think it's costly) For the inexpensive and too inexpensive lines, however, they have to be inverted, so that as price goes up we’re showing the decreasing cumulative frequency (i.e., the higher the price goes, the fewer individuals think it's cheap). The charts below show this inversion. Therefore, What’s the Situation? Well, the central points are fine -- IDP is where cross and OPP is where too inexpensive and too pricey cross.
We found the information very useful, so we thank you for creating such a friendly tool for conjoint analysis. Co-founder, Statum Health Philadelphia, PA, USAhttp://www.conjoint.online