Willingness to Pay (WTP)

Willingness to pay (WTP) is the highest price a specific customer is prepared to pay for your product. It is not a property of the product but of the customer: different segments have very different willingness to pay for the same product.

What willingness to pay depends on

• Perceived value: how big is the problem, and how well does your product solve it in the customer's eyes?
• Alternatives: what does the next-best solution cost, including "build it ourselves" and "do nothing"?
• Budget and urgency: even convinced customers do not pay above their budget, and without urgency the purchase gets postponed.
• Reference prices: prices the customer knows from the category anchor their expectations.

Measure it instead of guessing

For founders without a research budget, three approaches have proven practical: customer interviews with questions about quantified value, survey techniques like the Van Westendorp method, and real price tests in sales conversations. More important than the perfect method is collecting external signals at all instead of estimating willingness to pay internally.

In the 9-step process, willingness to pay feeds into step 6 as one of the signals for the price ceiling.