How to Identify Key Psychological Price Points
The Van Westendorp method uses a series of questions to identify key psychological price points given the respondents introduction to a product description.
Respondents are asked to report:
1. The price at which the product is so cheap that the respondent would question its quality
2. The price at which the product is inexpensive, but not so inexpensive that the respondent would question its quality
3. The price at which the product is expensive, but not so expensive that the respondent would consider it; and the price at which the product is so expensive that the respondent would not consider it
The price measurements in each of the respective categories provide a distribution of perceptions about the acceptable price of the product. The analysis of these distributions will help answer such questions as what is the average expected price; at what price would we expect purchase intention to drop sharply; and at what point is the price too inexpensive to imbue a quality image? Economists express these concepts in terms of price elasticity of demand.
The key to an effective Van Westendorp study is to create a price scale so that lower is not always better and so that users of a product are differentiated form non-users of the product. Furthermore, the price – value of the product must be measured so that an accurate view of price perceptions and propensity to buy are included.
Respondents often report preference for an expensive product over a cheaper alternative, but this may not hold true in an actual purchase situation. Validation measures for pricing questionnaires are always essential.
Understanding this method can help your pricing analysis be even more effective. To learn more about price points, click here.
Van Westendorp Price Volume Curve From Market Research