Van Westendorp Price Sensitivity Meter

PSM yields four intersection-based price points. The optimal price point (OPP) is where the 'too cheap' and 'too expensive' curves cross, balancing rejection at both extremes. The indifference price point (IPP) is where the 'cheap' and 'expensive' curves cross, often read as the expected or normal price. The point of marginal cheapness (PMC) and the point of marginal expensiveness (PME) mark the lower and upper bounds of the range of acceptable prices. Together, van Westendorp's four points describe a price band and two reference values rather than a single recommended price.

No. Despite its name, the optimal price point is simply the price at which the proportion of people rejecting the product as too cheap equals the proportion rejecting it as too expensive, minimizing extreme resistance. It says nothing about how many people would actually buy or about costs, so it is not a revenue- or profit-maximizing price. As pricing-research guides emphasize, PSM characterizes perceived acceptability, not demand. To optimize revenue or profit you need volume estimates from a method like Gabor-Granger or choice-based conjoint, which is why PSM is best used as an exploratory complement rather than a standalone pricing decision.

Use Van Westendorp early, when you want to understand the range of prices customers perceive as acceptable and to surface reference points for a new or repositioned product, especially before you know enough to design a demand study. Use Gabor-Granger when you need an actual demand curve, revenue- or profit-maximizing price, and elasticity at specific price points for a defined product. The two are complementary: PSM frames the acceptable band and perception, Gabor-Granger quantifies demand within it, and many studies run both, then validate against choice-based conjoint or real sales before committing to a price.