Price Sensitivity Measure | 4Service Group

Price Sensitivity Measure

Price Sensitivity Meter (PSM) or the Van Westendorp Method

PSM is a research method that allows you to determine the most acceptable consumer price range based on the perceived value of the product.

It is used in the development of a new product and while studying the perception of price for an existing product. The PSM pricing methodology is as follows:

The respondent is presented with a description of the concept (be it a product or service) and is then asked 4 questions about it:

  • What price would put you off buying this product as you think its too expensive ?
  • What price for this product would raise concerns regarding its quality as it is so low?
  • What price for this product appears high but you would still consider purchasing it?
  • At what price would you consider this product a bargain?

In addition to the four questions from the classical methodology, two more questions may be asked in relation to the probability of purchase.

  • How likely is it that you would buy a product for the price of… (the price which was considered least expensive by the respondent)?
  • How likely is it that you would buy a product for the price of… (the price which was considered most expensive by the respondent)?

What tasks can be solved with this service?

  • The total probabilities for purchase taken from all respondents are calculated using certain price values and a demand curve is constructed on the basis of the values obtained.
  • It determines the boundaries of the market price range and estimates the approximate prices at which a particular product/service can be promoted.
  • PSM gives an average retail price for well-known consumer products.

The implementation of this method is considered optimal for new products or services prior to their launch on the market or in situations where there is reason to suspect that the price set by the manufacturer would not be accepted by customers and needs reviewing.

Why choose 4Service?

  • We have 17 years of market research experience
  • We consolidate our international and local experience with other chains to promptly find a solution and flexibly respond to situations.
  • We operate throughout the whole country.  
  • We are able to adapt to techniques and specifics requested by the client in order to provide insightful and valuable conclusions to solve a particular business problem.

 

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