Four questions, four curves and four crossing points, worked through on an illustrative survey, with the cleaning step and the segment split most analyses skip.
A Van Westendorp analysis asks every respondent four prices, turns each set of answers into a cumulative curve and reads the price range from where the curves cross. On an illustrative survey of 200 buyers of a software add-on, after removing 27 inconsistent answers, the range of acceptable prices runs from 30.40 to 51.11 per user a month, with an optimal price point of 37.50 and an indifference price of 40.18. Split by customer size, the same data gives two ranges that overlap only between 35.50 and 43.17.
Worked in full in Pricing Strategy by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The method, also called the price sensitivity meter, is popular because it needs no prototype, no conjoint design and no competitor list. Its output is a corridor, not a price: it tells you where buyers stop taking a price seriously at each end. The arithmetic is simple, and the mistakes are in the preparation of the data rather than in the curves.
Each respondent answers, in this order, for a reporting add-on priced per user per month:
| Item | Value |
|---|---|
| Respondents | 200 |
| Answers failing the consistency check | 27 |
| Respondents used | 173 |
| Median answer, too cheap | 26 |
| Median answer, cheap | 34 |
| Median answer, expensive | 47 |
| Median answer, too expensive | 57 |
A usable respondent gives four prices in strictly rising order: too cheap below cheap, cheap below expensive, expensive below too expensive. Anyone who does not has misread a question, most often by reading the scale backwards. In this survey 27 of the 200 fail the test, 13.5 per cent. They are removed before any curve is drawn. In Excel, with the four answers in B to E, a flag column is =AND(B2<C2,C2<D2,D2<E2).
Too cheap(p) = share of respondents whose too cheap answer is at or above p
Cheap(p) = share whose cheap answer is at or above p
Expensive(p) = share whose expensive answer is at or below p
Too expensive(p) = share whose too expensive answer is at or below p
The two "cheap" curves fall as the price rises; the two "expensive" curves rise. "Not cheap" is 1 minus Cheap, and "not expensive" is 1 minus Expensive. In Excel, with the too expensive answers in E2:E174 and the test price in H2: =COUNTIF($E$2:$E$174,"<="&H2)/COUNT($E$2:$E$174).
| Price | Too cheap | Not cheap | Not expensive | Too expensive |
|---|---|---|---|---|
| 25 | 64.2% | 8.1% | 98.8% | 0.6% |
| 30 | 30.1% | 26.6% | 94.2% | 1.7% |
| 35 | 13.3% | 50.3% | 85.5% | 4.6% |
| 40 | 2.3% | 71.1% | 72.3% | 11.6% |
| 45 | 0.0% | 82.7% | 55.5% | 17.9% |
| 50 | 0.0% | 96.0% | 37.6% | 32.4% |
| 55 | 0.0% | 99.4% | 26.0% | 48.0% |
Each crossing is found by evaluating the curves at every whole price and interpolating linearly between the two prices where the difference between the curves changes sign.
| Point | Curves that cross | Price |
|---|---|---|
| Point of marginal cheapness (PMC) | Too cheap and not cheap | 30.40 |
| Optimal price point (OPP) | Too cheap and too expensive | 37.50 |
| Indifference price point (IPP) | Cheap and expensive | 40.18 |
| Point of marginal expensiveness (PME) | Not expensive and too expensive | 51.11 |
The range of acceptable prices runs from the PMC to the PME, 30.40 to 51.11, a corridor 20.71 wide, or 55.2 per cent of the optimal price. Below 30.40 more buyers find the product suspiciously cheap than find it no longer a bargain; above 51.11 more reject it outright than still find it short of expensive. At a price of 38, close to the OPP, only 6.4 per cent call it too cheap and 8.1 per cent too expensive, so 85.5 per cent find it neither.
The OPP minimises outright rejection. It is not the price that maximises revenue or profit, because no question asks whether the respondent would buy. Put the corridor next to the economic value to the customer and a measured price elasticity before choosing a point inside it.
| Sample | Respondents | PMC | OPP | IPP | PME |
|---|---|---|---|---|---|
| Consistent answers only | 173 | 30.40 | 37.50 | 40.18 | 51.11 |
| All answers, uncleaned | 200 | 31.69 | 37.50 | 40.43 | 49.44 |
| Smaller customers | 87 | 26.67 | 31.50 | 33.88 | 43.17 |
| Larger customers | 86 | 35.50 | 45.00 | 47.12 | 58.80 |
Leaving the backwards answers in narrows the corridor from both ends and pulls its ceiling down by 1.67, because a reversed respondent adds a low "too expensive" answer. The optimal point does not move, which is why the error goes unnoticed: the headline number looks stable while the range a sales team is allowed to quote has shrunk.
The segment split matters more. The pooled corridor of 30.40 to 51.11 is an average of two markets. Smaller customers accept 26.67 to 43.17; larger customers 35.50 to 58.80. A single list price at the pooled OPP of 37.50 sits in the upper half of what small customers accept, 5.67 under their ceiling, and 7.50 below the optimal point of large customers, who would have taken more.
Treating the optimal price point as the answer. It is the price at which the fewest people reject the product on price alone, which is a reasonable place to start a test and a poor place to stop. The second mistake is pooling segments whose willingness to pay differs: if the customer base has two populations, run the four crossings for each, and expect a good-better-best structure or a size-based price to come out of it rather than one number. Each segment then needs enough respondents: with 86 in a segment, one answer moves a curve by about 1.2 points.
Clean the answers for order, build four cumulative curves, interpolate the crossings and report the corridor, 30.40 to 51.11 here, with its segments beside it. Then choose the price inside the corridor with value and volume evidence, not with the survey alone. Pricing Strategy follows a price from list to pocket, and the free workbooks for the book carry the discount and price-volume arithmetic that comes after the corridor is set.
The optimal price point is where as many respondents call the price too cheap as too expensive, so it minimises outright rejection. The indifference price point is where as many call it cheap as expensive, often read as the normal market price. In the illustrative survey they are 37.50 and 40.18. Neither is a revenue-maximising price, because the method never asks whether anyone would buy.
Enough per segment, not in total. Each curve is a cumulative share, so with 86 respondents in a segment one answer moves a curve by about 1.2 points. The illustrative survey has 200 respondents, 173 after cleaning, which is comfortable for the pooled range but thin once it is split into two segments of 87 and 86.
Yes. A respondent whose too cheap price is not below the cheap price, or whose expensive price is not below too expensive, has misread the questions. In the example 27 of 200 answers, 13.5 per cent, fail that check, and leaving them in pulls the top of the acceptable range down from 51.11 to 49.44.
This article is one calculation from Pricing Strategy. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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