Pricing Strategy

When to use

Use whenever a price needs to be set or changed and the current approach is cost-plus (price = cost + target margin, ignoring what the customer will actually pay) or competitor-matching (copying a rival's price without checking whether your value proposition is comparable). Also use to test a proposed price change before committing to it.

What it does

Grounds pricing in two independent, complementary methods run through a bundled calculator: Van Westendorp Price Sensitivity (four-question willingness-to-pay survey, giving an acceptable price range and a floor below which customers doubt quality) and price elasticity modeling (revenue and margin at each price point given an estimated or tested elasticity coefficient) — so the recommendation is bounded by real customer behavior, not internal cost structure alone.

Method

1. Run or collect Van Westendorp responses: ask a representative sample four questions per product — at what price is this so cheap you'd doubt the quality; a bargain; starting to feel expensive; so expensive you wouldn't consider it. Minimum ~30 responses for a directional read, 100+ before a launch-critical decision.
2. Run the bundled calculator's Van Westendorp module (scripts/pricing_calculator.py) to get the four crossing points and the acceptable price range — the floor (below which quality is doubted) and ceiling (above which it's rejected outright) bound your pricing options before elasticity is even considered.
3. Estimate or obtain a price elasticity coefficient — from a real price test if you have one, from category benchmarks if you don't (call this out explicitly as an assumption, not a fact, if it's a benchmark).
4. Run the elasticity module across a realistic price-test range to see revenue and margin at each point — these two often peak at different prices, and the choice between them is a real strategic call, not a math problem.
5. Overlay the Van Westendorp range on the elasticity table: discard any price points outside the acceptable range regardless of what the elasticity model says, since a price outside the willingness-to-pay range risks brand/quality perception damage the elasticity model doesn't capture.
6. Check for a Kano-style structure if pricing tiers/packaging: which features are must-haves (expected, don't differentiate price), performance features (linear value, price scales with them), and delighters (disproportionate willingness to pay) — use this to decide what goes in which tier, not just what's cheap to build.
7. Recommend a price with the explicit trade-off named: "recommend $X, which is the revenue-maximizing point within the Van Westendorp acceptable range; margin-maximizing would be $Y but falls outside/inside the range for reason Z."