Van Westendorp pricing analysis – Alida Help Center

Van Westendorp pricing analysis is ideal for establishing a broad pricing range for completely new products, services, or offerings that have no point of comparison in the current marketplace. This article will walk you through what Van Westendorp is, how to optimally leverage the Van Westendorp template within the Alida platform, and how to analyze your data afterward.

What is Van Westendorp pricing analysis?

Imagine you are launching an innovative product, service, or offering that has no equivalent in the current marketplace. There is nothing else like it, which makes competitive analysis and pricing research an impossible task. How do you go about determining what you could charge consumers when you have no reference point? Van Westendorp is ideal for addressing this pricing conundrum.

Essentially, Van Westendorp is a research-backed technique that helps you arrive at the lowest and highest possible price points for an offering. It's a survey-based approach designed to help you come up with a broad pricing range. This analysis is based on a few core assumptions about consumer behavior:

Generally, customers prefer to pay the lowest possible price.
A suspiciously low price leads customers to believe that the product is low-quality, inferior, or lacking in some way, and therefore not worth buying.
A price can be too expensive and also dissuade customers from buying the product.

While these assumptions seem intuitive, Van Westendorp provides a systematic way to quantify these tendencies and turn them into actionable data.

Tip: The broad price range is just a starting point for your research. After using Van Westendorp, you can use Gabor-Granger to more accurately determine the optimal price.

How do I use Van Westendorp?

Van Westendorp works by presenting participants with a series of open-ended numeric questions and asking about four different price points ranging from what they would consider to be a suspiciously low price point to what would be a prohibitively high one. Here's how it works in practice:

Determine whether the product, service, or offering you want to price is a good candidate for Van Westendorp analysis. Van Westendorp is ideal for innovative concepts and product categories where existing market pricing lacks a clear reference point. For example, if you are launching a new cereal, sneaker, or luxury handbag, you could use competitive analysis to determine an approximate price range for your offering. On the other hand, a new piece of tech that is the forerunner in its product category is a good candidate for Van Westendorp.
Use the Van Westendorp template provided in the Alida platform: The template includes everything you need for Van Westdendorp. There are four Number questions on separate pages that ask which prices participants would consider good value, too low, high but worthwhile, and too expensive. Scripts on each page validate the prices entered.

For example, let's say you are trying to price an all-in-one robotic dog butler device that does multiple pet care tasks for your dog in your absence. Your Van Westendorp survey questions may look like this:

At what price do you think the Robotic Dog Butler would be a good value for money?
What price for the Robotic Butler would be so low that you would start to question the quality?
At what price do you think the Robotic Dog Butler would be higher priced but you would still consider purchasing?
At what price do you think the Robotic Dog Butler is too expensive to even consider?

A participant may answer $250 to the first question, $50 to the second question, $350 to the third question, and $500 to the fourth question. Scripting prevents participants from entering prices that cause logical inconsistencies within the data. For example, the "so low that you would start to question the quality" price must be lower than the "good value for money" price; entering a higher price will cause an error.

Considerations and limitations

Even though the responses are numeric and therefore quantifiable, essentially you are collecting qualitative data. Everyone's internal reference point for what constitutes a reasonable price is different. Therefore, the pricing data you collect can vary wildly.
Outlying responses can skew data. Van Westendorp aims to establish the broadest possible price range for a new offering or product category that has never been priced before. This can lead to some extreme responses. Going back to our robotic dog butler example, someone could put $1 as the "so low that you would start to question the quality" price or $1,000,000 as the "too expensive to even consider" price.
To deal with outliers, you can consider:
- Using scripting validation that enforces a numeric range, but is still broad enough to offer participants the utmost flexibility in their responses. For example, for the robotic dog butler, such a price range can be $25 to $10,000.
  The Van Westendorp template already includes this scripting validation. All you have to do is edit the minimum and maximum values.
- Trimming outliers from your raw data. Use your best judgement when you do this. You can trim a certain percentage off the bottom and top range of responses (for example, the bottom 3% and the top 3%). Alternately, pick out the most "out there" responses and remove them.
Sample representativeness. As with any survey, the results are only as good as the sample. Ensure your survey participants are representative of your target market for accurate results.

How do I include Van Westendorp in my survey?

Use the Van Westendorp template when creating a new survey:

Download the Van Westendorp survey template here.
Import the survey template.
Before the Van Westendorp questions, include information about the product or service. This information should appear before the Van Westendorp exercise so participants have a chance to review it first. Optionally, add an image or a video along with a description of the product or service.
Update the product/service reference in each question. For example, in the sentence "At what price do you think [INSERT PRODUCT/SERVICE] would be a good value for money?" replace the bolded item with your product or service.
If the Van Westendorp questions are supposed to come at the end of a concept test, add the concept testing questions before the Q1 VW 2nd Lowest Price Point question.
If you update the names of survey questions, ensure you update the scripting references as well.
To edit the scripting validation that enforces a numeric range:
- Click one of the Page elements that has a script to open it for editing.
- Click Scripting.
- Click the On Complete tab.
- Look for these lines of code:
```
const minValue = 25;
const maxValue = 10000;
```
- Replace 25 with your desired minimum number.
- Replace 10000 with your desired maximum number.
- Click Save.
- Repeat these steps for all Page elements with scripts applied.

How do I analyze my data?

Analysis of Van Westendorp data must be performed outside of the Alida platform. The first part involves performing some calculations in Excel. To start, you'll export your raw response data. Then you'll have to figure out the following:

The range of unique price levels
The number of actual responses at each price level
The number of actual and implicit responses at each price level
The number of actual and implicit responses as a percentage of total responses

At the end of the Excel portion of this process, you'll end up with a spreadsheet that looks something like this:

The second part involves plotting the percentages into a line chart. The line chart is where the Van Westendorp pricing analysis magic happens.

To analyze your Van Westendorp data:

In standard reporting, export your report data to Excel.
For this analysis process, Excel (Response Data) is the recommended option.

Tip: If you'd like to perform this analysis with weighted data, weight your data in reporting before you export it.
In Excel, remove any extraneous columns.
You should only be left with the columns for MemberID and your Van Westendorp pricing questions.
Reorder the question data columns so the price points are in ascending order, and then update the column header labels.
This will make the other calculations more efficient. The column order should go, from left to right:
- Lowest Price Point (update to "Too Cheap")
- 2nd Lowest Price Point (update to "Cheap")
- 2nd Highest Price Point (update to "Expensive")
- Highest Price Point (update to "Too Expensive")
Add a Unique Price Level column.
- Put all of the prices mentioned in response to Van Westendorp questions in this column.
- Sort the prices in ascending order.
- Remove duplicates.
- You're left with one list of all the unique price points that were mentioned.
In the example screenshot below, 20 participants have responded to Van Westendorp questions with price points ranging from $3 to $29. These price points are captured in the Unique Price Level column to the right of the raw data.
To the right of the Unique Price Level column, add four columns, one for each question (Too Cheap, Cheap, Expensive, Too Expensive). Use formulas to sum up the number of actual responses for each price to each question.
At the bottom of the actual response columns, add a Total row summing up the columns to check that the totals equal the total number of responses.
Here we see that the total number of responses in each column matches the total number of responses in the raw data, which is 20. That's a sign the calculations were done correctly.
To the right of the columns you added in step 5, add four more columns, one for each question (Too Cheap, Cheap, Expensive, Too Expensive). Use formulas to sum up the actual and implicit responses for each price to each question.
The logic here is that a person who thinks $29 is too cheap would also think that anything below $29 is too cheap as well. That one person needs to be accounted for at every price below $29. Similarly, on the flip side, someone who thinks $3 is too expensive will need to be accounted for at every "too expensive" price point above $3.
- For the Too Cheap question, sum up the Too Cheap responses from the given row to the bottom of the "Too Cheap, Actual Responses" column. Do this for every price point.
- For the Cheap question, sum up the Too Cheap responses from the given row to the bottom of the "Cheap, Actual Responses" column. Do this for every price point.
- For the Expensive question, sum up the Expensive responses from the given row to the top of the "Expensive, Actual Responses" column. Do this for every price point.
- For the Too Expensive question, sum up the Too Expensive responses from the given row to the top of the "Too Expensive, Actual Responses" column. Do this for every price point.
To the right of the columns you added in step 6, add four more columns, one for each question (Too Cheap, Cheap, Expensive, Too Expensive). Use these columns to calculate the percentage of responses for each price point.
For each percentage, divide the sum totals of actual and implicit responses (which you calculated in step 7) by the total number of responses (which you calculated in step 6).
Take the percentages you calculated in step 8 and plot them into a line chart.
The following line chart uses different data than the example data set we used in the Excel calculations above, but it gives you a good idea of what a Van Westendorp line chart should look like. This line chart is the culmination of all your Excel calculations and the crux of Van Westendorp pricing analysis. It gives you the broad pricing range information you're looking for.
- The horizontal x-axis represents price points.
- The vertical y-axis represents the percentage of the total sample.
- There are four lines: Too Cheap, Cheap, Expensive, and Too Expensive.
- The diamond-shaped area in the center of the graph represents the broad pricing range you're looking for.
- The intersection point of the Too Cheap and Expensive lines represents the lower end of your pricing range. In this example screenshot, the lower end of the pricing range is $6.50.
- The intersection point of the Expensive and Cheap lines represents the normal price point. In this example screenshot, the normal price point is $7.00.
- The intersection point of the Too Expensive and Cheap lines represents the upper limit of your pricing range. In this example screenshot, the upper limit is $8.50.
- The intersection point of the Too Expensive and Too Cheap lines represents the optimal price point. In this example screenshot, the optimal price point is $7.00.