Determining the Optimal Price Point: Using Van Westendorp’s Price Sensitivity Meter

Marketers have long acknowledged that the pricing decision is a significant component of the marketing mix; the theoretical attention paid to pricing is certainly not reflected by the wealth of techniques in the field of marketing research. Many authors have identified the importance of pricing as it increases sales, has a major influence on customer loyalty, and also serves as a proxy for quality. Despite the aforementioned significance of pricing, several authors have indicated that pricing is the most deserted element of the marketing mix. The question of pricing new products acts as a key challenge for management. One important reason for the difficulty faced in pricing decisions is the lack of knowledge concerning customer reactions to pricing strategies. The market researcher, who is confronted with new product pricing decisions, could be asked about consumer’s perceptions of and reactions to prices. In this paper an attempt has been made to describe four different methods for obtaining data used to determine prices for new products and then explicitly work on van Westendorp’s model to determine the optimum price point of Vivel Cell Renew body lotion (ITC product) for SKUs of 250 ml. With the help of the PSM model, we would attempt to gauge the price point at which the consumers intend to purchase this body lotion. The methodology has been explained with an example from real life and respondents were recruited purposively with quota sampling. The target segment for the study was females within the age group of 20–35 years, SEC A (based on the SEC classification). A sample of 240 respondents could be collected. The research revealed that the range of low rejection extends from Rs. 170 (what the consumers want) up to Rs. 190 (what the manufacturer can go up to). The optimal price point figured out was Rs. 190 for 250 ml Vivel Cell Renew. There are a multitude of approaches one can take and the exact method depends on the particular circumstances of the request, but with this whole exercise, an attempt was made to model the actual pricing which takes place in the real world and highlight the pricing research as one of the core methodologies in custom research.