Answer Van Westendorp Pricing Questions

When setting prices, you could be missing opportunities to increase your profitability: You might be able to charge more without hurting sales or to increase sales greatly by lowering a price point a notch.
     Redoing all your pricing at once could easily overwhelm you and your staff. It’s also probably unnecessary. But periodic pricing reviews and adjustments that you roll through your product and service inventories are an essential part of running your business.
     Setting prices properly on unfamiliar brands or items is especially challenging as well as especially important. Set the price too high and you’ll chase away the early adapters you’ll need in order to spread the word. Set the price too low—especially if you don’t clearly call it an introductory offer—and you burn a low value for the product into the brains of shoppers.
     A useful template for price reviews is based on a set of four questions developed by Dutch behavioral economist Peter van Westendorp and used by a great many retail pricing specialists. Here’s my version of the four Van Westendorp questions, each beginning with the words “At what price would shoppers consider this product or service to be…”

• …inexpensive enough that they’d think hard before deciding not to purchase it?
• …expensive enough that they’d think hard before deciding whether to purchase it?
• …so inexpensive that they’d think there might very well be something wrong with the item?
• …so expensive that they’d immediately reject the idea of buying the item?

     Pricing consultants have developed techniques for getting this information from people with a minimum of bias. If your business is using the services of such a consultant, have them tell you how they do this. When doing your own analyses, answer the Van Westendorp questions not only by watching the sales results, but also by watching and listening to people shopping in your store and on your ecommerce sites. Also, to the degree you can, watch and listen to shoppers in other places that sell what you sell.
     An analysis of answers to the Van Westendorp questions gives you ranges in which to set your prices for maximum profitability.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Consider Downselling to Commercial Accounts
Round Prices to Whole Dollars for Better-Best
Allow Modest Expectations of Discounted Products
Advertise Tensile Pricing Selectively