Van Westendorp price sensitivity meter (PSM)

The Van Westendorp price sensitivity meter (PSM) is a pricing survey method that asks four questions about when a product feels too cheap, a bargain, expensive and too expensive, then plots the answers as curves to find an acceptable price range. It is used early in pricing work, when you need a realistic range before testing exact prices.

The Dutch economist Peter van Westendorp presented the method in 1976 at the ESOMAR Congress. It measures stated willingness to pay, so it shows how people perceive prices rather than what they will actually spend.

The four questions

After a short, neutral description of the product, each respondent answers four open price questions:

1. Too cheap: At what price would this product be so cheap that you would doubt its quality?
2. Bargain: At what price would it be a bargain, a great buy for the money?
3. Expensive: At what price would it start to feel expensive, so that you would have to think before buying it?
4. Too expensive: At what price would it be so expensive that you would not consider buying it?

A valid respondent gives four increasing numbers: too cheap < bargain < expensive < too expensive. Remove anyone whose answers are out of order before you build the curves.

From answers to curves

For every price that appears in the answers, compute four cumulative shares:

• Too cheap at price P: the share whose "too cheap" answer is P or higher. This curve falls as price rises.
• Bargain at P: the share whose "bargain" answer is P or higher. Also falling.
• Expensive at P: the share whose "expensive" answer is P or lower. This curve rises.
• Too expensive at P: the share whose "too expensive" answer is P or lower. Also rising.

Two helper curves complete the chart: "not a bargain" (100% minus bargain) and "not expensive" (100% minus expensive).

The price points and the acceptable range

The acceptable price range runs from PMC to PME. Crossings usually fall between two listed prices, so interpolate linearly between them.

Worked example

In an illustrative dataset of 22 people pricing a scheduling app (not real data), two respondents give answers out of order and are removed. The remaining 20 produce PMC ≈ $10.89, OPP ≈ $15.75, IPP = $15.00 and PME ≈ $20.56. The acceptable range is about $11 to $21, and OPP and IPP sit close together around $15 to $16, which suggests people broadly agree on a normal price. The full table, the spreadsheet formulas and the interpolation are in the guide to the Van Westendorp pricing survey.

Some analysts define the range with a narrower pair of crossings: "too cheap" with "expensive" and "too expensive" with "bargain". Both conventions appear in practice, so state which one you used.

How to read the result

• A wide range means price is not a strong barrier inside it, and you can choose on positioning and costs.
• OPP far from IPP means opinions about price are split. Look at the curves by segment before choosing a number.
• The range is not a revenue forecast. PSM does not tell you how many people will buy at each price. The Newton, Miller and Smith extension (1993) adds purchase-likelihood questions at the bargain and expensive prices to estimate demand, and methods such as Gabor-Granger or conjoint analysis estimate demand at set prices.

When to use it and common mistakes

Use the PSM for a new product or a new market where you have no price history, for checking whether a planned price sits inside what the audience accepts, and for comparing price perception across segments.

• No product description. Without it, each person prices a different product in their head.
• Showing a price first. Any number shown before the four questions becomes an anchor; see anchoring effect.
• Changing the question order. Keep the four questions in the same order for everyone.
• Keeping illogical answers. Out-of-order sets distort every curve.
• Mixing segments. Business and consumer buyers, or new and existing customers, can have very different ranges. Plan enough valid answers per segment you want to read.
• Treating the result as a final price. Stated prices are a starting point. Confirm with a real offer or an experiment.

Running a Van Westendorp survey

In SurveyNinja, build a product description screen, then the four questions as slider questions, or as numerical response questions from the Basic plan, in a fixed order. An open number field gives the least anchoring; if you use sliders, make the range wide, start at zero and keep it the same for everyone. Add a few screening questions to reach the right buyers, then export the answers to CSV or XLSX on any plan and build the curves in a spreadsheet.