Scary Moment of Truth: What’re Customers Really Willing to Pay?
Solid execution of value pricing requires an understanding of customer willingness-to-pay (WTP). To effectively implement the best prices, let's spend a little time digging into the willingness-to-pay.
Our target with pricing - find the best prices for you and your customers, then implement them effectively.
Define customer willingness-to-pay
Customer WTP is the maximum amount of money a customer is willing to hand over for what you sell. By understanding WTP you possess knowledge. This knowledge helps you achieve a price as close as possible to what they're willing to pay. You'll know which strategies and tactics to use to get them to pay that much.
There are two main reasons WTP can be a challenge to understand.
WTP Isn't A Single point
A customer's willingness-to-pay is affected by many things: value perception, personal priorities, current pain points, alternative offers, etc. These things change in a instant. Which means you can ask a customer the WTP question on two different days and get different answers.
It also means WTP is hard to pinpoint, because it's not a point! How can it be when it's influenced by things that shift and change? Stop looking for the WTP point. Start looking at it as a range or zone.
Bias Gets in the Way
The second challenge in understanding WTP is bias. When we ask customers WTP-related questions, their answers are infused with bias (even with the best of intentions). When we try to limit customer bias by making our own "assumptions", our own bias comes into play. We're horrible at leaving our own biases behind. Instead we can strive to make more educated analysis to support our assumptions.
3 Ways to Understand Willingness-to-Pay
In this video we'll look at why direct WTP questions can backfire and what to do about it. Then I give you three ways to start understanding. These things can help you mitigate the challenges of understanding WTP.
Got questions? I just started a FB group, Charge Your Worth with Janene the Pricing Lady, where you can start asking some of those burning questions. Engage in discussions with myself and others about pricing. See you there!