Pricing research
Van Westendorp price sensitivity meter, step by step
The Van Westendorp price sensitivity meter (PSM) asks each respondent four prices: too cheap, cheap, expensive and too expensive. Plot the share of respondents at or beyond each price as four cumulative curves, and the crossings give the point of marginal cheapness, the optimal price point, the indifference price point and the point of marginal expensiveness. The range from the first to the last is the band of prices the market finds acceptable. It tells you what people will accept, not what maximises revenue.
How results are checked
Named statistical review pending. Selected automated reference cases are published on the validation page.Step 1: ask the four questions in order
Show the product concept first, then ask, as open numeric answers in the local currency: at what price would it be so cheap you would doubt the quality? A bargain? Starting to get expensive, though still worth considering? So expensive you would not consider it? Keep the order fixed and the wording neutral; changing either changes the answers.
Optionally add the Newton-Miller-Smith (NMS) questions: how likely are you to buy at your own “cheap” price, and at your own “expensive” price, on a five-point scale. They turn the acceptance curves into estimates of trial and revenue.
Step 2: clean the ladder
Each respondent's answers should rise: too cheap ≤ cheap ≤ expensive ≤ too expensive. Flag anyone whose answers do not, exclude them from the curves and report the count. Also drop blank, non-numeric and negative answers. If you weight the sample, apply the weight to every curve.
Step 3: build the cumulative curves
At every price anyone typed, compute four shares of the base: “too cheap” and “cheap” are the shares whose answer is at or above the price (they fall as price rises); “expensive” and “too expensive” are the shares whose answer is at or below the price (they rise). “Not cheap” and “not expensive” are 1 minus the cheap and expensive curves. Join the points with straight lines.
Step 4: read the four intersections
Solve each crossing on the straight-line segments between the two surrounding prices. PMC = too cheap × not cheap; OPP = too cheap × too expensive; IPP = cheap × expensive; PME = not expensive × too expensive. Report the range of acceptable prices (PMC to PME), the base and the number of excluded respondents with the chart.
The method
Formula
TC(p) = share(too cheap ≥ p), C(p) = share(cheap ≥ p), E(p) = share(expensive ≤ p), TE(p) = share(too expensive ≤ p)
PMC: TC = 1 − C · OPP: TC = TE · IPP: C = E · PME: 1 − E = TE
where
- share(·)
- weighted share of the respondents in the base (consistent answers only)
- p
- a price on the grid of every distinct price answered
- Crossing
- found by linear interpolation between the two grid prices where the curves change order
- NMS trial
- each respondent's purchase probability is 0 at their too-cheap and too-expensive prices, the calibrated likelihood at cheap and expensive, and linear in between; revenue = p × mean trial
Worked example
Sample data: the synthetic subscription pricing study that the Van Westendorp tool loads with “Use sample data” (400 generated respondents pricing a monthly meal-kit subscription, not real people). 23 respondents answered the four questions out of order and are excluded, leaving 377 in the curves.
- Point of marginal cheapness (PMC): 20.91. Below this price more people think the subscription is too cheap to trust than think it is no longer cheap.
- Optimal price point (OPP): 29.50. “Too cheap” and “too expensive” cross: the fewest people reject the price outright.
- Indifference price point (IPP): 29.85. Equal shares call the price cheap and expensive; often read as the price the market considers normal.
- Point of marginal expensiveness (PME): 39.65. Above this, more people find the price too expensive than find it not expensive.
The range of acceptable prices is therefore 20.91 to 39.65, with the optimal and indifference points close together near the middle. The sample also asks the Newton-Miller-Smith purchase-likelihood questions; with the default 0 / 10 / 30 / 50 / 70% calibration, expected trial peaks at a price of 25.00 (26.2% trial) and expected revenue per respondent peaks at 31.00 (23.9% trial). Those two NMS figures, not the PSM intersections, are the ones to use when the question is revenue.
Using it well
When to use it
Use it when
- Use: Early pricing work on a new or changed product, when you need the band of prices that will not be rejected out of hand.
- Use: Categories where buyers have a sense of price but no fixed list price to anchor on.
- Use: Alongside Newton-Miller-Smith questions when you also want an indication of trial and revenue.
Not the right tool when
- Avoid: You need a demand curve at specific candidate prices: use Gabor-Granger, which asks about the prices you can actually charge.
- Avoid: You need trade-offs between price and features or competitors: use conjoint or discrete choice.
- Avoid: Respondents cannot judge the price without seeing the product (unfamiliar technology, B2B contracts).
How to interpret it
Rule of thumb
The PSM measures price perception, so read it as acceptance: inside the PMC–PME range few people reject the price, outside it many do. The optimal and indifference points are reference prices, not profit-maximising ones.
Next step: run Van Westendorp on your own data
The free Van Westendorp price sensitivity meter reads a CSV, Excel or SPSS file in your browser, flags and excludes out-of-order respondents (or keeps them, if you choose), applies an optional weight, draws the four curves with PMC, OPP, IPP and PME, and adds the Newton-Miller-Smith trial and revenue curves when you select the two purchase-likelihood questions. No account, and the file is not uploaded.
Questions
Frequently asked questions
What are the four Van Westendorp questions?
At what price would the product be so cheap that you would doubt its quality (too cheap)? At what price would it be a bargain (cheap)? At what price would it start to seem expensive, though you would still consider it (expensive)? At what price would it be too expensive to consider (too expensive)? Each is asked as an open numeric answer.
Which Van Westendorp price point should I use?
None of them is a revenue-maximising price. Use the range from the point of marginal cheapness to the point of marginal expensiveness as the band of prices the market finds acceptable, and the optimal and indifference points as reference prices inside it. To estimate demand or revenue, add the Newton-Miller-Smith purchase questions or run a Gabor-Granger test.
What should I do with respondents whose answers are out of order?
A respondent whose 'too cheap' price is above their 'cheap' price (and so on) has misread the ladder. The usual practice is to exclude them from the curves and report how many there were. A share above about 10% suggests the questions or their order confused people.
Do the curves use 'not cheap' or 'cheap'?
Both conventions exist. The classic definitions cross 'too cheap' with 'not cheap' (1 minus cheap) for the point of marginal cheapness and 'too expensive' with 'not expensive' for the point of marginal expensiveness; the optimal price point crosses 'too cheap' with 'too expensive'; the indifference point crosses 'cheap' with 'expensive'. Always state which convention a report uses.
How many respondents does a Van Westendorp study need?
The curves are cumulative shares, so they are smooth with a few hundred respondents per group you want to read separately. With small samples the intersections move by several currency units when a handful of answers change, so report the range rather than a precise point.
Sources and next steps
References & further reading
- [1]Van Westendorp, P. H. (1976). NSS Price Sensitivity Meter (PSM): A new approach to study consumer perception of prices. Proceedings of the 29th ESOMAR Congress, Venice.
- [2]Newton, D., Miller, J., & Smith, P. (1993). A market acceptance extension to traditional price sensitivity measurement. Proceedings of the American Marketing Association Advanced Research Techniques Forum.
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