Employing The Van Westendorp Price Sensitivity Model To Price Your Latest “Lunettes De Createurs” Collection

As we mentioned in a previous article, pricing your designer and unique pieces of “Lunettes De Createurs” should not be a nightmare in the absence of competitive products, should not include improvisation, and should not be solely based on the customer’s willingness to pay for the product. The Van Westendorp (VW) Price Sensitivity Model is a reliable method to price your products maximizing both sales and profitability.

In the VW model researchers ask respondents four questions that reflect four perspectives, collect the answers, and plot the data on a graph for analysis:

Cheap: at what price does this product start to seem cheap to you, that is, when does it start to seem like a bargain?

Expensive: at what price does this product start to seem expensive to you?

Too Cheap: at what price does this product become too cheap to you, that is, so cheap that you would question its quality and not buy it?

Too Expensive: at what price does this product become too expensive, that you would not consider buying it?

The questions relate price to quality in a way a poorly priced product can transmit signals of poor quality. You are dealing with a niche product so keep in mind to find the right audience to ask the four questions. If you don’t want to ask your customers and patients you can outsource to online services offered by Amazon Mechanical Turk (MTurk) or Google Surveys where you can select a representative sample of the fashion enthusiast target audience.

The data collected and representing the responses of the participants for each question are plotted on two graphs. The first graph explains the Cumulative percentage of the respondents related to price. The second graph explains the probability (0 to 1) of respondents related to price. Each graph includes four lines representing the responses to each question. On the graph, you need to find and note where the Too Cheap and Expensive lines intersect (called point of marginal cheapness) and where the Too Expensive and Bargain (or Cheap) lines intersect (called point of marginal expensiveness). The price range between the two points of intersection is a fair and right range of prices where profit and sales are optimized and is correct to choose prices from. To be even more precise, the point where the Too Expensive line and the Too Cheap line intersect is the Optimal Price Point that you should be charging. The point where Cheap or Bargain and Expensive lines intersect is called the Point of Indifference Price. Of course, you want to take into consideration your bundled products and offers, as well as loyalty programs and shopping sprees, and whether you want to include those specific products in such offers and programs.

You can also look at the graph plotting the probability of respondents related to price and determine whether you want your price to be expensive targeting only premium customers in the middle tier of the market, too expensive targeting only ultra-premium customers in the upper tear of the market, or too cheap and bargain (or cheap) targeting the lower tier of the market. Having found the Optimal Price Point and determined the price you will be employing you have the choice to employ whichever price based on informed decision and measurable data.