Dating back to 1976, the Van Westendorp Price Sensitivity Model (PSM) remains one of the most effective methods for determining the right price today. This is a technique that we follow when conducting pricing market research for our clients. It’s particularly useful when there is no cost data available from similar products, as it uses information gathered from surveying customers instead.
This method is based on the idea that there’s an optimum price range for every product or service, rather than one single price point. Research results are plotted on a graph, giving brands a better understanding of the full range that their customers would be willing to pay – but also how they may feel about a product that is pitched at each price.
At the lower end, buyers may worry a product or service is too cheap and therefore poor quality but could purchase it anyway. The upper end of the price range might be a stretch, but they are prepared to pay it because they believe it’ll be good value for money, or because they cannot buy what they want elsewhere.
Why use market research for pricing?
Our customers depend on our market-leading research services to develop new concepts, understand consumer behaviours, and determine the effectiveness of their advertising. Price analysis works in the same way, giving you a clear insight into how much people are prepared to spend.
Key benefits include:
- Drive sales
- Attractive prices to win customers without them worrying about it being too cheap
- Grow your margins
- Know exactly what prices will attract customers without squeezing your margins
- Protect your reputation
- Prices that reflect the quality of your products
- Uncover new opportunities
- Learn where you could expand your offering with new add-ons, or identify opportunities for up or cross-selling based on real customer demand.