The van Westendorp Price Sensitivity Meter (PSM or VW) is one of the most widely used techniques among market researchers for determining consumer price preferences. More precisely, it allows a better understanding of customers’ price elasticity, including price thresholds and range of acceptable pricing.
While the traditional Van Westendorp approach does not attempt to solve the demand estimation problem, as it is a pure pricing approach, it is possible to extend its potential and obtain important volume/uptake information and, consequently, also revenue information.
Depending on the study requirements, the questionnaire needs to include as little as 3 questions, and no more than 6 questions, making the VW exercise one of the quickest and most effective pricing models.
The main limitation of VW is that price is the only element of the product of interest considered in the questionnaire; all other product elements are kept fixed. If these also need to be modelled, then a more complex approach is recommended, such as a conjoint or DCM framework.
R-sw Pricing is the only commercial software that allows you running both the traditional VW model and its volume/revenue extension.