Target prices

Target prices

Ian Tidswell provides an article that highlights multiple ways to assess customers Willingness-to-Pay (WTP), which is a key capability required of all companies.

Having a robust way to assess customers Willingness-to-Pay (WTP) is a key capability required of all companies.  It’s surprising to me how many B2B companies rely on gut-feel or ad hoc processes to get this done.  This may be driven in part at least from not being familiar with the techniques, and the various challenges each presents, along with a more general lack of understanding of the importance of getting price right.  

Techniques to estimate Willingness-to-Pay estimation can be grouped as follow (I’m taking a ‘big-tent’ approach so some techniques that give directional information are also included).

Direct Price Experiments

Testing different prices directly with customers during real purchasing decisions can give some great information on WTP, but is often difficult or risky, and only works when the product is in the market.

Prospective Price Opinion: Survey Response

These techniques ask customers directly how they would respond to different price points. They all run the risk of respondents being unwilling to expose their Willingness to Pay.

 

Key points include:

  • Prospective Price Opinion: Unconscious Reaction
  • Historical Analysis: various techniques
  • Hybrid methods

 

Read the full article, B2B Price Research Methods to set list- and target-prices, on EenConsulting.com.