Your Customers’ Willingness To Pay

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by 93s2q

December 20, 2021

Your Customers’ Willingness To Pay 

According to ProfitWell.com – Finding the optimal point to set your pricing allows both you and your customers to derive the highest value from the relationship.

Finding this sweet spot is the foundation of value-based pricing, a far stronger method than either cost-based or competitor-based.

You are driving people to your pricing page so you have to know the price they are looking for before they get there.

Discovering what your customers are willing to pay.

People aren’t very good at thinking about specific price points. They won’t be able to tell you if your product is worth $99/ month or $79/month.

This is the understanding behind Van Westendorp’s Price Sensitivity Meter developed to determine the pricing landscape for a product. It relies on 4 questions:

  1. At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive)

  2. At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive/High Side)

  3. At what price would you consider the product to be a bargain—a great buy for the money? (Cheap/Good Value)

  4. At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good? (Too cheap)

By surveying current and prospective customers with these questions, you can plot the cumulative frequencies for each of these categories:

The optimal price here lies in that middle price range. You want your pricing to be within that center mass where customers find value from your product, don’t consider it too cheap, but still consider it a good deal.

Just as with feature analysis, you can then break these numbers down by buyer personas, finding the optimum price point for each potential customer.

From this data, you can also plot price elasticity to determine where the optimum market share is found.

For more on pricing, signup for insights, info-sessions, and group discussion by requesting to join the AlphaEquity CEO COMMUNITY or email  kpoulsen@AlphaEquityBuilder.com with the subject “more on pricing”.


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