Willingness to Pay (WTP)

The maximum price a buyer would pay for a product or service before declining the purchase. WTP is not purely a function of product quality — it emerges from a composite of brand perception, past experience, self-concept alignment, and comparison to alternatives. Two functionally identical products can command very different prices in different brand contexts.

Measurement methods include the Van Westendorp Price Sensitivity Meter, conjoint analysis, and the Becker-DeGroot-Marschak mechanism. Because WTP varies substantially across customer segments, value-based pricing typically begins by identifying the highest-WTP segment and working backward to set the price ceiling, then cascading down to lower-WTP segments with differentiated tiers.