It’s a theory developed by Dutch economist Adriaan Westendorp that helps people set prices for their products and services. It was first published in the 1970s and is now widely used for pricing decisions both in marketing research and business decision-making.
The theory suggests that prices should be set at the point where the expected demand is equaled by the supplier’s perceived value of what they are selling. In other words, it aims to find a price point where consumers will feel confident buying a product or service, but not think it’s too pricey either.
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What is Van Westendorp Pricing?
It is a survey-based qualitative approach used to find the value of a product or service. It is used by gathering and analyzing judgments that define the perceived value of the product or service to set prices.
The Van Westendorp Pricing Model is normally applied to value-based products or services where consumers have little experience in purchasing them. The product or service must have relatively low price elasticity and be of high quality. This model is also widely used by managers who don’t want to rely on just their intuition.
It’s important for managers to remember that different customers will draw different conclusions about what constitutes fair pricing and as a result, will assign different values for the same offering.
Benefits of Van Westendorp Pricing:
It sets the price of a product or service based on what customers actually value.
It can be used to set the right price for the right product or service, regardless of its quality. (In other words, focusing on the actual value of a product will make sure that it does not sell at too high-a-penny.)
The VWP isn’t perfect; it doesn’t apply to all situations and might not be suitable for products where consumers have extensive experience buying them.
However, if used in conjunction with other pricing strategies, then it should still be an effective pricing model.
Pros and Cons of Van Westendorp Pricing:
Along with the advantages of Van Westendorp Pricing, there can be some disadvantages as well that are discussed below:
Pros:
This model has some obvious benefits such as its ability to set the right price tag for the right product or service. It also helps in getting customers to buy them by taking into account what consumers actually value.
It can be used to estimate the value of a product or service with little or no experience in buying them.
It helps in setting an optimal price for products and services which are relatively cheap in price but hard to value, such as services that provide social benefits.
It is widely used by managers who don’t want to rely on just their intuition.It is also easy to implement and simple for even novice managers to understand.
Cons:
You might not know how much consumers really want or need a product or service and might set the price too high and get it rejected, which could ruin your business prospects and your company’s profits.
The cons of this model, though, include its inability to be used for products where consumers have extensive experience in buying them; the VWP can’t be used for commodities such as petrol or salt, since people know how much they should pay for these products.
Conclusion:
To conclude, the Van Westendorp model is a survey-based qualitative approach used to find the value of a product or service. It is used by gathering and analyzing judgments that define the perceived value of the product or service to set prices.
