A guide to the Van Westendorp Price Sensitivity Meter (PSM)?

Determining the right price for a product is a critical challenge for product managers and founders, as underpricing can result in lost revenue while overpricing may deter potential customers. The Van Westendorp Price Sensitivity Meter (PSM) is a widely used tool that helps identify optimal price points by assessing user perceptions of value and pricing, especially useful for new products without established market benchmarks. Conducting a PSM involves preparing surveys that present the product and gather price sensitivity data, collecting a large volume of responses, and analyzing the data to find price points of marginal cheapness, marginal expensiveness, and the optimal price point. While PSM can inform the range of acceptable prices, final pricing decisions should also consider factors like strategy, costs, customer lifetime value, and branding. Despite the insights PSM offers, it cannot make the final pricing decision, which must also account for broader strategic considerations.