Established model
The Van Westendorp price sensitivity meter
Peter van Westendorp · 1976
Also known as PSM
Four questions about price that between them mark out the range a market will tolerate.
Its place in the frameworkBusiness Core›Monetisation
What it does
Rather than asking what someone would pay, it asks at what price something would seem too expensive, expensive but worth considering, cheap, and so cheap that quality is in doubt. The four answers plotted together give a band with a floor and a ceiling, and the floor is the finding people forget: too low reads as a warning.
- Reach for it when
- When setting a price for something new, where there is no history to extrapolate from.
- Where it stops
- It measures stated intent, not behaviour, and it says nothing about volume at any price. It gives you a plausible range to test, not a price.
Peter H. van Westendorp, “NSS Price Sensitivity Meter”, ESOMAR Congress, 1976.
Why it sits at Monetisation
How the organisation turns what it offers into money. Not the price, but the whole structure: what is charged for, by whom, how often, and on what basis.
A model is only useful when you reach for it at the right moment. This one answers a question that arises here — so it is filed here, and nowhere else. These are the working areas it serves:
- Revenue modelBusiness model literature on revenue streams; the pricing-metric question is treated as a strategic choice rather than a commercial one.
- PricingThe standard cost-plus, competition-based and value-based distinction, and the consistent finding that value-based pricing is underused.
- Margin structureUnit economics: contribution margin, cost to serve, and how both behave as volume grows.
- Revenue qualityStandard analysis of revenue concentration, retention and predictability, used in valuation and in credit assessment.
What it touches elsewhere
Nothing in a business is decided on its own. A conclusion reached with this model at Monetisation lands in these other cores, whether or not anyone follows it there.
- Goal CoreA purpose the monetisation model cannot sustain is one the company will quietly abandon.
- Market CoreWillingness to pay is a market fact, discovered rather than decided.
- Data CoreMargin, retention and concentration are the measures this object lives or dies by.
- Omni CoreHow and when a customer is charged is part of what they experience.
Filed at the same place
These answer questions that arise at Monetisation too. Where they disagree with this one, the disagreement is the useful part.
- The business model canvasNine linked areas that together describe how an organisation creates, delivers and captures value.
- Value-based pricingSet price from the value delivered relative to the customer’s next best alternative, not from what it cost to make.
Elsewhere in Business Core
- Tuckman’s stages of group development
- Belbin Team Roles
- Herzberg’s two-factor theory
- Jobs to be done
- The Kano model
- The value proposition canvas
- Core competence
- VRIO
- The resource-based view
- The theory of constraints
- Lean thinking
- Co-opetition and the value net
- Transaction cost economics
- Stakeholder theory
- The power–interest grid
- DuPont analysis
- Break-even and cost–volume–profit analysis
- Unit economics
- The Kraljic Matrix
- The bullwhip effect
- The SCOR Model
- On-time in-full
- Overall equipment effectiveness
- Value stream mapping
- The three lines model
- ISO 31000 risk management
- Maslow’s hierarchy of needs
- Kotter’s eight-step change model
- Situational leadership
- The Lean Startup
- Design thinking
- Porter’s value chain
- The McKinsey 7S framework
- The growth–share matrix
- Six Sigma and DMAIC
These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.
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