pricing-validation

Pricing Validation

Test willingness to pay before launching with proven pricing research methodologies. Combine Van Westendorp, Gabor-Granger, and behavioral techniques to find your optimal price point.

When to Use This Skill

• After solution validation to test willingness to pay
• Before launch to set initial pricing
• Pricing changes to test new price points
• New segments to understand price sensitivity by segment
• Competitive positioning to price against alternatives
• Feature pricing to understand value of add-ons

Methodology Foundation

| Aspect | Details | |--------|---------| | Source | Van Westendorp PSM (1976), Gabor-Granger method, behavioral economics | | Core Principle | "People can't accurately predict what they'd pay. Use structured methods to triangulate, and verify with real purchasing behavior." | | Why This Matters | Pricing wrong costs you customers (too high) or money (too low). Every 1% improvement in price has 11% profit impact on average. |

What Claude Does vs What You Decide

| Claude Does | You Decide | |-------------|------------| | Structures analysis frameworks | Strategic priorities | | Synthesizes market data | Competitive positioning | | Identifies opportunities | Resource allocation | | Creates strategic options | Final strategy selection | | Suggests implementation approaches | Execution decisions |

What This Skill Does

1. Finds price range - Identifies acceptable pricing boundaries
2. Tests price points - Measures demand at specific prices
3. Identifies optimal price - Balances revenue and conversion
4. Segments by willingness - Who will pay more vs. less
5. Validates pricing model - Subscription vs. one-time vs. usage
6. Reveals value perceptions - What drives pricing acceptance

How to Use

Run Van Westendorp Analysis

I want to find the optimal price range for [product].
Run me through Van Westendorp Price Sensitivity Meter.
Provide the questions and analysis framework.

Test Specific Price Points

I'm considering pricing at [$X, $Y, $Z].
Help me design a Gabor-Granger test to measure demand at each price.

Validate Pricing Without Asking Directly

I want to validate my $99/month pricing without asking "would you pay?"
What behavioral and indirect methods can I use?

Instructions

Step 1: Choose Your Pricing Research Method

## Pricing Research Methods

### Method Selection Guide

| Method | Best For | Sample Size | Complexity |
|--------|----------|-------------|------------|
| Van Westendorp PSM | Finding price range | 100-200+ | Medium |
| Gabor-Granger | Testing specific prices | 50-100 | Low |
| Conjoint Analysis | Feature/price trade-offs | 200+ | High |
| A/B Testing | Final validation | 500+ visitors | Medium |
| Behavioral Signals | Qualitative insights | 10-30 | Low |

### When to Use Each

**Van Westendorp (Price Sensitivity Meter):**
- You don't know where to start
- Want to find acceptable price range
- Have access to survey respondents

**Gabor-Granger:**
- You have candidate price points
- Want to test specific prices
- Need demand curve

**Conjoint Analysis:**
- Multiple features and price levels
- Need to understand trade-offs
- Have resources for complex analysis

**A/B Testing:**
- Already have traffic/users
- Testing final price decisions
- Want real conversion data

**Behavioral Signals:**
- Early stage, small sample
- Qualitative validation
- Can't run formal surveys

Step 2: Van Westendorp Price Sensitivity Meter

## Van Westendorp PSM

### The Four Questions

Ask respondents all four questions about the product:

1. **TOO EXPENSIVE:**
   "At what price would you consider this product to be so expensive
   that you would not consider buying it?"

2. **TOO CHEAP:**
   "At what price would you consider this product to be priced so low
   that you would question its quality?"

3. **EXPENSIVE BUT WORTH IT:**
   "At what price would you consider this product starting to get expensive—
   it's not out of the question, but you'd have to think about buying it?"

4. **GOOD VALUE:**
   "At what price would you consider this product to be a bargain—
   a great buy for the money?"

### Analysis

Plot cumulative distribution curves for each response:
- "Too Expensive" (cumulative from low to high)
- "Too Cheap" (cumulative from high to low)
- "Expensive" (cumulative from low to high)
- "Good Value" (cumulative from high to low)

### Key Price Points

| Point | Definition | Meaning |
|-------|------------|---------|
| **PMC** (Point of Marginal Cheapness) | Where "Too Cheap" intersects "Expensive" | Below this, quality concerns emerge |
| **PME** (Point of Marginal Expensiveness) | Where "Too Expensive" intersects "Good Value" | Above this, significant resistance |
| **OPP** (Optimal Price Point) | Where "Too Expensive" intersects "Too Cheap" | Best price for adoption |
| **IDP** (Indifference Price Point) | Where "Expensive" intersects "Good Value" | What people expect to pay |

### Acceptable Price Range
PMC to PME = your acceptable pricing range

### Interpretation Guide

**Narrow range (PMC close to PME):**
- Price sensitive market
- Commodity perceptions
- Strong competitor reference prices

**Wide range (PMC far from PME):**
- Price flexibility
- Differentiated product
- Segmentation opportunity

Step 3: Gabor-Granger Method

## Gabor-Granger Price Testing

### How It Works

Show product, then ask purchase intent at specific price points.
Start high or low, adjust based on response.

### Question Format

**Monadic (one price per person):**
Show each respondent only ONE price:
"Would you buy this product at $X?"
- Definitely would buy
- Probably would buy
- Might or might not buy
- Probably would not buy
- Definitely would not buy

**Sequential (multiple prices per person):**
If "Yes" → show higher price
If "No" → show lower price
Continue until you find their threshold

### Analysis

**Purchase Intent Translation:**
| Response | Probability |
|----------|-------------|
| Definitely | 90% |
| Probably | 70% |
| Might | 30% |
| Probably not | 10% |
| Definitely not | 0% |

**Demand Curve:**
| Price | Purchase Intent | Weighted % | Expected Revenue |
|-------|-----------------|------------|------------------|
| $49 | 80% | 68% | $49 × 68% = $33.32 |
| $79 | 60% | 48% | $79 × 48% = $37.92 |
| $99 | 40% | 32% | $99 × 32% = $31.68 |
| $149 | 20% | 14% | $149 × 14% = $20.86 |

**Optimal Price:** $79 (highest expected revenue)

### Sample Size Requirements

- 30-50 per price point (monadic)
- 50-100 total (sequential)
- Segment analysis requires more

Step 4: Behavioral/Indirect Methods

## Pricing Validation Without Asking About Price

### Why Indirect Methods Matter
- People overestimate willingness to pay when hypothetical
- Real behavior differs from stated intent
- Indirect signals often more reliable

### Method 1: Reference Price Anchoring

**Questions to ask:**
- "What are you currently spending on [similar product/solution]?"
- "What's the most you've ever paid for [category]?"
- "What would you expect this to cost based on similar products?"

**Analysis:**
If they're spending $100/month on alternatives, $150 might be possible.
If they've never paid >$50 for similar, $200 is risky.

### Method 2: Value Quantification

**Questions to ask:**
- "How much time does this problem cost you per week?"
- "What's the cost of this problem not being solved?"
- "If this saved you X hours/week, what's that worth?"

**Analysis:**
If problem costs them $500/month in time, $100/month solution seems cheap.
Price relative to quantified value, not arbitrary numbers.

### Method 3: Trade-off Questions

**Instead of:** "Would you pay $X?"
**Ask:** "Which would you choose?"
- Option A: $79/month with features X, Y, Z
- Option B: $49/month with features X, Y only
- Option C: Free with feature X only

**Analysis:**
Distribution reveals pric