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The decision for pricing a product or service isn\u2019t as simple as it seems.\u00a0 It is a key consideration for executives. \u00a0Pricing way above the rival products risks not attracting the required customers while charging way below the competitor products could be equally detrimental.<\/p>\n
Manufacturers can utilize research to have a better understanding on what consumers are willing to pay for a product. \u00a0There are a host of research-based pricing approaches available\u2014e.g., Monadic, Sequential Monadic, Conjoint Analysis, Van Westendorp Price Sensitivity Meter<\/a> etc.\u2014however, researchers often get confused on which one to use in a given product development phase.\u00a0 Let\u2019s discuss the Van Westendorp Price Sensitivity Meter approach for now.<\/p>\n The Price Sensitivity Meter (PSM)<\/a> is an easy-to-use method of evaluating price of a new product.\u00a0 The method was developed by Peter Van Westendorp in 1976. \u00a0Through the PSM approach, consumers undergo a short survey where they answer 4 questions about their price expectations. \u00a0These answers are used to determine the maximum amount a consumer is willing to pay for a particular product and how higher the price be set for the customer to still buy the product.<\/p>\n The approach offers a ball-park figure for the price of a product, is easy to administer, requires less effort from the consumers, and the PSM results are communicated in the form of simple diagrams.\u00a0 The approach, however, surveys only the \u201cwillingness to pay\u201d attribute of a product, and is more appropriate for innovative products\u2014as it is not easy to determine prices with competing products using this approach.\u00a0 PSM analysis should be a part of your Pricing Strategy<\/a> process.<\/p>\n The PSM approach encompasses the following key phases:<\/p>\n Let\u2019s discuss the first 2 phases of the approach.<\/p>\n The initial phase of the PSM research entails deciding on the medium of the study and planning the logistics, design, resources, guidelines, and governance protocols for the survey. \u00a0More specifically, the phase involves:<\/p>\n The second phase pertains to analyzing the respondents\u2019 data from the field survey.\u00a0 This is done once the field data has been validated and cleansed of any inconsistent errors.\u00a0 The steps taken in this phase include:<\/p>\n Interested in learning more about the other phase of the Van Westendorp Price Sensitivity Meter<\/a>?\u00a0 You can download an editable PowerPoint on the Price Sensitivity Meter (PSM)<\/strong> here <\/u><\/a>on the Flevy documents marketplace<\/a>.<\/p>\n You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library<\/a>. FlevyPro<\/a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:<\/p>\n “My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”<\/p>\n \u2013 Bill Branson, Founder at Strategic Business Architects<\/p>\n<\/blockquote>\n “As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”<\/p>\n \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p>\n<\/blockquote>\n “As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant’s toolbox.”<\/p>\n \u2013 Michael Duff, Managing Director at Change Strategy (UK)<\/p>\n<\/blockquote>\n “FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight \u2013 it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”<\/p>\n \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p>\n<\/blockquote>\n “Several times a month, I browse FlevyPro for presentations relevant to the job challenge I have (I am a consultant). When the subject requires it, I explore further and buy from the Flevy Marketplace. On all occasions, I read them, analyze them. I take the most relevant and applicable ideas for my work; and, of course, all this translates to my and my clients’ benefits.”<\/p>\n \u2013 Omar Hern\u00e1n Montes Parra, CEO at Quantum SFE<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":" The decision for pricing a product or service isn\u2019t as simple as it seems.\u00a0 It is a key consideration for executives. \u00a0Pricing way above the rival products risks not attracting the required customers while charging way below the competitor products could be equally detrimental. Manufacturers can utilize research to have a better understanding on what… Exploring Van Westendorp Price Sensitivity Meter (PSM)<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":7012,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[81],"tags":[2083,2078,2084,2085,2077,1145,2076,2082,2079,2081,2080],"class_list":["post-7011","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy","tag-marketing-research","tag-monadic-analysis","tag-plotting-distributions","tag-price-curves","tag-pricing-strategies","tag-product-development","tag-product-pricing","tag-research-survey","tag-sequential-monadic-price-analysis","tag-van-westendorp-price-sensitivity-meter","tag-van-westendorp-pricing-method"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/7011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=7011"}],"version-history":[{"count":8,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/7011\/revisions"}],"predecessor-version":[{"id":7817,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/7011\/revisions\/7817"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/7012"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=7011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=7011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=7011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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<\/a><\/p>\nPlan and Execute Market Research Survey<\/strong><\/h2>\n
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Analyze Data<\/strong><\/h2>\n
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Do You Find Value in This Framework?<\/h2>\n