willingness to pay

Examples of willingness to pay in the following topics:

• Value-Based Pricing

  • How much do you expect to pay for a large pizza?
  • Survey methods are sometimes used to determine value a customer attributes to a product or a service.
  • The results of such surveys often depict a customer's willingness to pay.
  • The principal difficulty is that the willingness of the customer to pay a certain price differs between customers, between countries, even for the same customer in different settings (depending on his actual and present needs), so that a true value-based pricing at all times is impossible.
  • Other constraints tend to be informal.

• Price Discrimination

  • The price of a flight from Singapore to Tokyo can vary widely if one buys the ticket in Singapore compared to Tokyo (or New York or elsewhere).
  • Here, the monopoly seller knows the maximum price each individual buyer is willing to pay, allowing them to absorb the entire consumer surplus.
  • Price varies by attributes such as location or by customer segment, or in the most extreme case, by the individual customer's identity; where the attribute in question is used as a proxy for ability/willingness to pay.
  • Their ticket cost is the same, but it may cost more to the airline to obtain a vegetarian meal for them.
  • Some economists have argued that this is a form of price discrimination exercised by providing a means for consumers to reveal their willingness to pay.

• Other Pricing Strategies

  • One pricing strategy does not fit all, thus adapting various pricing strategies to new scenarios is necessary for a firm to stay viable.
  • By responding to market fluctuations or large amounts of data gathered from customers - ranging from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer's willingness to pay.
  • Pricing above competitors can be rewarding to organizations, provided that the objectives of the policy are clearly understood and that the marketing mix is used to develop a strategy to enable management to implement the policy successfully.
  • The key is to prove to customers that your product justifies a premium price.
  • Dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer's willingness to pay.

• SIVA: Solution, Incentive/Information, Value, and Access

  • SIVA is a formal approach to customer-focused marketing.
  • Value can be defined as the extent to which goods or services are perceived by customers to to meet their needs or wants.
  • Value is measured in terms of a customer's willingness to pay for a product, and often depends more upon the customer's perception of a product's worth rather than its intrinsic value.
  • Distribution channels move products and services from businesses to consumers and to other businesses.
  • -- in order to provide a solution.

• Customer Wants and Needs

  • Demand is the economic principle that describes a consumer's desire, willingness and ability to pay a price for a specific good or service.
  • Anything marketers can do to simplify purchasing will attract buyers.
  • Product sampling, coupons, and rebates may also provide an extra incentive to buy.
  • The marketer may take specific steps to reduce post-purchase dissonance.
  • Companies should pay attention to the extent to which what customers say they want does not match their purchasing decisions.

• The Demand Curve

  • Demand is the willingness and ability of a consumer to purchase a good under the prevailing circumstances.
  • When clients want a product and are willing to pay for it, we say that there is a demand for the specific product.
  • Demand does not only have to do with the need to have a product or a service, but also with the willingness and ability to buy it at the price charged for it.
  • Jeffries therefore boiled a few jars of jam and asked their friends and family if they were interested in buying it and how much they would be willing to pay for it.
  • However, demand is the willingness and ability of a consumer to purchase a good under the prevailing circumstances.

• General Economic Conditions

  • Various economic forces influence an organization's ability to compete and consumer's willingness and ability to buy products and services.
  • Consumers' ability and willingness to buy changes.
  • For marketers, opportunities were plentiful during prosperity, and they attempted to expand product lines to take advantage of consumers' increased willingness to buy.
  • During a recession, consumers' spending power is low, as they are busy paying off debts incurred through credit purchases during more prosperous time.
  • Illustrate how fluctuations in the economy influence consumers' willingness and ability to buy products and services

• Elasticity of Demand

  • Elasticity of demand is a measure used in economics to show the responsiveness of the quantity demanded of an item to a change in its price.
  • Price elasticities are almost always negative, although analysts tend to ignore the sign even though this can lead to ambiguity.
  • The overriding factor in determining PED is the willingness and ability of consumers after a price change to postpone immediate consumption decisions concerning the good and to search for substitutes ("wait and look").
  • Percentage of income: The higher the percentage of the consumer's income that the product's price represents, the higher the elasticity tends to be, as people will pay more attention when purchasing the good because of its cost.
  • Who pays: Where the purchaser does not directly pay for the good they consume, such as with corporate expense accounts, demand is likely to be more inelastic.

• Cash Flow

  • Cash flow is extremely important to firms as this is how they buy goods, pay employees, fund new investments, and pay dividends.
  • This is how they buy goods, pay employees, fund new investments, and pay dividends.
  • Cash discounts are reductions on the base price given to customers for paying cash or within some short time period.
  • Another example is a gas station that gives discounts on gas prices to costumers who don't pay with credit cards.
  • A quick way to generate cash flow is to offer seasonal discounts.

• Channel Power, Control, and Leadership

  • Power is our willingness to use force in a relationship.
  • In the channel mechanism, power refers to the capacity of a particular channel member to control or influence the behavior of another channel member.
  • For instance, a large retailer may want the manufacturer to modify the design of the product, or perhaps be required to carry less inventory.
  • Both parties may attempt to exert their power in an attempt to influence the other's behavior.
  • The ability of either of the parties to achieve this outcome will depend upon the amount of power that each can bring to bear.