Van Westendorp Price Sensitivity Meter

The Van Westendorp Price Sensitivity Meter (PSM) is a survey technique that maps the range of prices consumers find acceptable by asking four open-ended questions about what price would seem too cheap, cheap (a bargain), expensive, and too expensive for a product. Introduced by Dutch economist Peter van Westendorp at the 1976 ESOMAR congress, it rests on the idea that consumers judge price not against a single point but against internal reference boundaries, below which quality becomes suspect and above which the product seems overpriced. From respondents' answers the analyst builds four cumulative distributions and reads off their intersections, which define an optimal price point, an indifference price point, and a range of acceptable prices bounded by the points of marginal cheapness and marginal expensiveness. Unlike methods that estimate a demand curve, PSM characterizes perceived price acceptability and is especially useful early in pricing, when little is known about a new product. It is quick, intuitive, and widely used, though it measures perception rather than purchase behavior or revenue.