Price sensitivity meter (psm) and how to do psm easily - compiled by AMR Group (Marketing Research in Vietnam - Nghien cuu thi truong Viet Nam)
Sometimes, a product is "new to the world", so it is neccesary for business to identify how consumers perceive new product. Marketing Research is a useful technique to answer such question. VINAMR Marketing Research & Consultants provide world class lean, focused and reliable research through deep understanding of the brief, international quality field, professional data handling & decision-orientated analysis, action focused recommendation.
Published on: Mar 4, 2016
Transcripts - Price sensitivity meter (psm) and how to do psm easily - compiled by AMR Group (Marketing Research in Vietnam - Nghien cuu thi truong Viet Nam)
Price Sensitivity Meter (PSM) and How to do PSM Easily
Sometimes a product is “new to the world”.
Perhaps it is the start of a new product /
service category. Or perhaps it has no
direct competitors, or even products that
could be used as reasonable substitutes.
In this case one approach is the price
sensitivity meter (PSM), also called the
Van Westendorp model after its inventor.
After exposing the respondent to a concept
description, we ask PSM’s four direct
pricing questions about the new product:
What price is so low they
would question its quality?
What is the highest price at which the product would still be a bargain?
What is the price at which the product is starting to get expensive?
What is the price at which the product becomes too expensive to
These questions have face validity. They are the kind of thing a marketer would
like to know about a product. In addition, they make a nice looking visual.
Variations on the cumulative distributions of the four questions are shown on a
single line chart
Van Westendorp suggested that the intersections of these lines had special
meaning. The right most one he called the “point of marginal expensiveness”
and the left most one he called “the point of marginal cheapness.” He posits the
two interior points, “the ideal price point” and “the optimal price point” as
endpoints of a reasonable range to consider for pricing the product.
Despite its face validity, PSM has no strong theoretical foundation, and no
record of accomplishment of predictive success. It does not provide a way to
optimize revenue, profits or net present value (NPV). Its complete reliance on
direct answers to questions with obvious intent makes many researchers
However, PSM is easy to do: all it takes is four questions and Excel software.
An exploratory pricing model like PSM may be the only way to go when we
have revolutionary or unique product to consider. When a product has
competition, however, it requires the kind of realistic, dynamic pricing
experiment described above – Where?
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with international training and experience, operating to global standards. The
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Compiled by AMR Group (Marketing Research in Vietnam-Nghien Cuu Thi
Truong Viet Nam) on 2014
Source: ACB annual report 2012
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This article is compiled by AMR Group to provide updated information on
markets. AMR Group puts the best effort to obtain the most accurate and timely
information available from various reliable sources. The article should be best
considered a reference and indicative only. It is not an offer or advice for any
actions related to any assets. AMR Group provides no warranty or undertaking
of any kind in respect to the information and materials found with, or linked to
the report and no obligation to update the information after the report was
released. AMR Group does not bear any responsibility for the compiled
information, or any consequences arising from its use.