Willingness-to-Pay (WTP)

What It Is

WTP is the price a customer will accept for a product — best understood as a range, not a single number. Measuring it directly (rather than guessing) is the foundation of any pricing decision.

The Canonical Methods

  • Van Westendorp PSM (1976): four questions — too cheap, bargain, expensive, too expensive — whose cumulative curves intersect at the Optimal Price Point (too-cheap × too-expensive), the Indifference Price Point (cheap × expensive), and the range bounds PMC/PME. Best when you don't yet know what the market will accept.
  • Gabor-Granger: ask purchase intent at discrete price points; the "would-buy" curve gives the demand curve, price elasticity, and revenue-maximizing price. Best for finding the revenue peak within a known range.
  • Conjoint: trades features against price to inform packaging.

Run PSM to bound the range, Gabor-Granger to locate the optimum within it; triangulate.

How It Applies to Marketing Factory

WTP measurement is the input to the higher-leverage pricing-packaging decisions, and it must be segmented by ideal-customer-profile (enterprise and SMB have different curves). Because real WTP studies are slow, costly, and small-N, the factory pre-screens with synthetic-pricing-research and decides on the small real panel with a bayesian-decision-rule. Surveys are agent-fieldable; setting the final price stays a human call.

Referenced from: pricing-packaging-and-wtp