4.4 Reforge - Pricing Analysis - Price Amount

  • Willingness to pay helps understand how much a customer is willing to pay for the value (value metric + features).
  • Avoid directly asking "How much would you pay?" as it's unreliable; users struggle to pinpoint a number and skew low.

Van Westendorp Price Sensitivity Meter

  • A method to gauge price sensitivity by asking a series of questions.
  • Example product used: Drift (chatbot for sales and marketing).

Steps:

  1. Product Description: Provide users with a description of the product.
  2. Pricing Tier Details: Show what's included in the pricing tier (features, usage limits) without revealing the actual price.
  3. Four Key Questions:
    • Too Expensive: At what price would you not consider buying the product?
    • Too Cheap: At what price would the quality seem questionable?
    • Not a Bargain: At what price is it starting to get too expensive, requiring thought?
    • Not Expensive: At what price would you consider the product a bargain?
  4. Graph Conversion:
    • Convert dollar value answers into percentage curves on a graph.
    • Example: If 90% of respondents thought $15 was "not expensive", the orange line (not expensive) would show 90% at $15.
    • Example: if 50% of the responses thought $30 price point was too expensive, the green line (too expensive) would show 50% at $30.
  5. Range of Acceptable Prices:
    • Determine the range of acceptable prices. That range is:
      • Intersection of the "too cheap" and "not a bargain" curves.
      • Intersection of the "not expensive" and "too expensive" curves.

Segmentation & Refinement

  • Segment the range based on personas or other factors.
  • Use ranges & data points, plus qualitative data (market, model, retention, revenue cohorts) and first principles reasoning to determine the final price.