How to calculate prices with the Van Westendorp model

4 key questions for optimal pricing 

The Van Westendorp pricing model poses 4 questions to customers to analyse the maximum price they are prepared to pay for a product. These questions are: 

• At what price would you not buy this product because it becomes too expensive? 
• At what price would you consider this product starts to become expensive, but would you still buy it? 
• At what price would you consider this product too cheap, and would you doubt its quality? 
• At what price would you consider this product cheap? 

The results of interviewing a substantial sample of customers are plotted on a graph, where the X-axis is the price, and the Y-axis is the percentage of respondents. Thus, the number of times each answer is repeated, for each price, allows the plotting of four curves. The curves show the perception of too expensive, expensive but acceptable, too cheap, and cheap. The point at which the “too expensive” and “too cheap” curves intersect will be the optimal price for each product featured in the survey. 

Advantages of the Van Westendorp model 

The main advantage is that this research is simple and requires minimal time from users. In addition, the presentation of the results in the coordinate graph allows you, as a retailer, to see the optimal prices, so you can adjust your prices to optimise sales and boost the engagement of potential customers. 

The main shortcoming of this analysis of consumer price sensitivity is that it does not consider the features and quality of products. Respondents see the type of product, but not its features. Given the complexity of today's markets, it may cause the data not to reflect reality objectively. Because these days we know, for example, that not all mobile phones or computers are perceived in the same way by the whole population.