Methodology
When gathering the data, we have repurposed the popular ‘Van Westendorp Price Sensitively Meter method”. This method is used in our research designs to provide your company withaunambigious and actionable insights.
Enhancing a popular research method
The Van Westendorp Price Sensitivity Meter (VWS) is a method used to determine the optimal price point for a product or service. It is based on the concept of price elasticity, which measures the sensitivity of demand for a product or service to changes in price. The VWS is a market research technique that helps businesses to determine the point at which customers will be willing to pay for a product or service without feeling that they are overpaying. The PriceAgent tool allows businesses to use this method to get live data on the optimal price points, with a 24h turn around.
Our Process
How The Software Works
The standard question sample
The VWS consists of four questions to measure the willingness to pay, each of which is asked of a sample of potential customers. The first question asks respondents to identify the price at which a product or service would be considered so expensive that they would not consider buying it. The second question asks respondents to identify the price at which a product or service would be considered reasonably priced. The third question asks respondents to identify the price at which a product or service would be considered cheap, or a bargain. The fourth and final question asks respondents to identify the price at which a product or service would be considered so cheap that they would question the quality or value of the item.
The responses are then plotted on a four-point scale, with the most expensive price at the top and the cheapest price at the bottom, resulting in a price sensitivity curve. This curve shows the prices at which respondents are most likely to purchase a product or service. The optimal price point is then determined by taking the average of the four points (the most expensive, the reasonably priced, the cheap, and the too cheap prices). This average is considered to be the “sweet spot” of the price sensitivity curve and represents the optimum price point for a product or service.
How is this method a powerful tool?
The VWS is a useful method for businesses as it helps them to determine the price point at which they can maximize their profits. By finding the optimal price point, businesses can ensure that they are charging a price that customers are willing to pay without feeling that they are being overcharged. Furthermore, businesses can use the VWS to test the effect of price changes on customer demand. This is useful for businesses that are looking to increase sales without sacrificing profit margins.
The VWS is a relatively simple and cost-effective way for businesses to determine the optimal price point for their products or services. It is also a useful tool for businesses that are launching a new product or service, as it allows them to understand the price point at which customers are likely to purchase the item. Furthermore, the VWS can be used to test the effects of price changes on customer demand. This is useful for businesses that are looking to increase sales without sacrificing profit margins.
Conclusion
Overall, the VWS is a useful method for businesses that are looking to determine the optimal price point for their products or services. PriceAgent is a relatively simple and cost-effective way of understanding customer demand and finding the right balance between pricing and profitability. Furthermore, the VWS method can be used to test the effects of price changes on customer demand, allowing businesses to make informed decisions about pricing strategies.
