How do you come up with defendable / justifiable logic for determining customer willingness to pay and pricing.
How can you defend say $42 price v. $43 price?
Thanks
How do you come up with defendable / justifiable logic for determining customer willingness to pay and pricing.
How can you defend say $42 price v. $43 price?
Thanks
Hi there,
First, I'm assuming you only want to talk about WTP and not cost-based/benchmarking forms of pricing.
In terms of willingness to pay, you really have a few ways:
Can you articulate the question a bit better please? More detail and more context please.
From whatever you have provided, here is what I can make out:
Hope this gives you some ideas and direction to think over.
You may need to better explain the question, as I am not sure I fully understand your doubt, but I'll give my best below.
Some people will stop buying above $42. So to have a $43 price you have to know how many will stop buying and compare that with the margin improvement you get from a higher price.
Example, if at $42 you have a $4 margin, and at $43 is $5… you would need a +25% volume drop in order not to raise the price.
Now, how do you figure out if a lot of people will not take the $43 price? You need to look at the value created by the product, the competitors price (vs. value proposition), and substitute products.