![]() XLSTAT allows to take into account the contribution of Newton et al. Between these two marginal prices, the authors estimate that sales volumes are high. The acceptable price range is given by, for the lower bound, the intersection between the too cheap and not cheap curves, and for the upper bound, by the intersection of the too expensive and not cheap curves. This price is called the Optimal Pricing Point (OPP), the price point at which the purchase intent will not be impacted negatively, meaning that outside of any other external factor, few people would be discouraged by this price. ![]() This price which corresponds to radically opposed opinions concerns a tiny group of panelists. The intersection between the too cheap and too expensive curves is the price at which many respondents consider the product to be too cheap or too expensive. Of course, even smaller respondents will find it too cheap (suspicious quality) or too expensive (inaccessible). This is the right price point for a majority of respondents, a small proportion finding it cheap (probably not expensive enough for the company marketing this product) or expensive (potentially at risk for of a concurrent). The IDP can be interpreted as the median market price for this type of product or as the price offered by a market leader. According to Van Westendorp, this price corresponds to the reality of the market. Even if it is not necessarily strong, there is a disagreement between these two groups of the same size of respondents on this price which has been named Indifference Price (IDP). The intersection between the cheap and expensive curves is the price for which the same number of panelists consider the product to be expensive or cheap. These curves, therefore, increase from 0 to 1 when the price increases. Therefore, for each of the prices indicated by the respondents, we calculate what proportion of consumers indicated a lower price. For expensive and too expensive, we take the cumulative distribution curve. These curves, therefore, decrease from 1 to 0 when the price increases. For each of the prices indicated by the panel participants, we calculate what proportion of respondents s indicated a higher price. ![]() TEX: too expensive (above the price one would be willing to pay for this specific product)įor this type of price sensitivity analysis, the usual result is a graph presenting a series of curves whose intersections determine critical prices: from the survey data, six cumulative distribution curves (or their opposites) are computed, first for the four types of prices collected (too cheap, cheap, expensive, too expensive), then, by deduction, we calculate the distribution for not cheap and not expensive.įor too cheap and cheap, we take the opposite of the distribution curve.EX: expensive (the upper price range at which one might buy the product).CH: cheap (the lower price range at which one might buy the product).TCH: too cheap (the price point is perceived too low for this specific product).This method consists of conducting a survey on a group of panelists of consumers and asking them how they perceive the price of a specific product. in 1993, to respond to mainstream criticism that this previous method did not take purchase intention into account. This version of price sensitivity analysis (and its impact on sales volume and revenue) is due to Van Westendorp and was presented at the ESOMAR Congress in 1976.
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