Here's how it works:
1. Each target segment has a price-sensitivity curve with four key price points.
i. Too expensive: the price at which the segment considers the backpack so expensive that
they would not consider buying it.
ii. Too cheap: the price at which the segment considers the price so low that the quality can't
be very good, and also will not buy it.
iii. Expensive/high side: the price at which the segment feels a backpack is starting to get
expensive; not out of the question, but requires thought.
iv. Cheap/good value: the price at which the segment considers a backpack a great buy.
2. Each segment will score a backpack's price based on a curve developed from these points, and
that Price Score will be used in the buy calculation (see appendix.)
3. The four points can be adjusted to create luxury or low-cost (highly price-sensitive) buyers. For
a luxury buyer, the “too cheap” price point is relatively high because the buyer wants to pay a
higher price, and will also be looking for luxury attributes and features.
We chose this model because rather than just saying lower is better, we thought that the idea of having
levels where a price could be subjectively seen along a gradient as too cheap or too expensive was
interesting. We borrowed this idea from the Van Westendorp Price Sensitivity Meter approach that
companies could use to determine a price that meets their strategy.