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aytm’s Van Konan price optimization model is our powered-up offering of the classic Van Westendorp price test, developed by in-house statistician Ivan Konanykhin. In addition to the traditional Van Westendorp outputs including the optimal price point, indifferent price point, and acceptable range,

Van Konan offers three add-on components to understand the larger financial modeling picture including revenue, sales frequency, and profit – all reported out via interactive charts and infographic. Explore the demo to see an example of Van Konan results output.

Van Westendorp, often abbreviated as VW or referred to as Price Sensitivity Meter (PSM), is a price test methodology aimed at understanding a consumer's willingness to pay for a product or service. The setup is very simple, asking respondents to provide four prices:

Price the offering is…

  1. So cheap as to question the quality
  2. Bargain worth considering
  3. Starting to become expensive but still worth considering
  4. So expensive as to no longer consider

Our platform automatically validates that each price point is greater than the prior, triggering a warning if that condition is not met.

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For the analysis, those four price inputs are plotted as six curves:

  • Too Cheap: percent indicating a given price as too cheap (price #1)
  • Cheap: percent indicating a given price as cheap but worth considering (price #2)
  • Not Expensive: percent not indicating a given price as expensive (inverse of price #3)
  • Not Cheap: percent not indicating a given price as cheap (inverse of price #2)
  • Expensive: percent indicating a given price as expensive but worth considering (price #3)
  • Too Expensive: percent indicating a given price as too expensive (price #4)

It is the intersection of these curves that point toward key price points and ranges:

  • Optimal Price Point: intersection of Too Cheap and Too Expensive
  • Indifference Price Point: intersection of Cheap and Expensive
  • Acceptable Price Range:
    • Low End: intersection of Too Cheap and Not Cheap
    • High End: intersection of Too Expensive and Not Expensive

 

Van Konan Add-On — Max Revenue

Enabling Max Revenue yields a view of estimated revenue across price points and the price point at which revenue is maximized.

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This add-on requires asking an additional purchase likelihood question, presented as a 0-100% scale. Respondents are asked how likely they would be to buy the offering at the four VW price points and a fifth lowest price point equal to half their reported “too cheap” price.

 

Van Konan Add-On — Max Sales Frequency

Enabling Max Sales Frequency provides context of purchase frequency at different price points and can be applied to revenue calculations during analysis.

This add-on requires asking an additional purchase frequency question for the same five price points as for Max Revenue. Depending on the anticipated purchase frequency range of the offering, the scale can range to cover hourly-, daily-, weekly-, monthly-, to yearly-oriented options.

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NOTE: Max Revenue is required for Max Sales Frequency.

 

Van Konan Add-On — Max Profit

Enabling Max Profit yields a view of estimated profit across price points and the price point at which price is maximized. No additional questions are required for this add-on, but estimated per unit cost is needed by the model to calculate profitability.

NOTE: Max Revenue is required for Max Profit, while Max Sales Frequency is suggested but not required.

 

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