PricingBrew

Insights & Tips

Already a subscriber? Login

Become a subscriber and unlock an information arsenal focused on making your pricing efforts more effective.

4 Myths About Willingness to Pay

Systematically analyzing and influencing customers’ willingness to pay is one of the most powerful levers that organizations have at their disposal to affect margins. But we often find that certain persistent myths make teams unwilling to even consider tackling this topic. These four myths are particularly widespread:

  1. There is no middle ground. Some people think that everyone has the same willingness to pay. Others say that everyone’s willingness to pay is so unique that you can’t possibly measure it. Both misperceptions prevent them from taking on willingness to pay projects.
  2. You can’t measure or predict it. Since you can’t read people’s minds, you can’t ever really know what they’re willing to pay. So why try?
  3. The buyers will tell you. If you have a good relationship with your customers, you can ask them what their budget is, and they’ll give you the true number. You can just use that to determine pricing.
  4. It is what it is. The market determines what the customer’s willingness to pay is at any point in time. All you can do is try to capture as much as you can.

What’s particularly insidious about these four myths is that all of them are sell-fulfilling. For example, if you believe you can’t measure willingness to pay, you will never try. Thus, you never measure willingness to pay, reinforcing your belief in the myth.

But none of these myths is actually true.

  1. You CAN segment customers into groups. We’ve never yet seen an industry where every customer was exactly the same or where each customer was so different that you couldn’t arrange them into some buckets. It’s never all or nothing.
  2. You CAN use historical data to predict willingness to pay. No, you can’t read a customer’s mind, but you can use past experience — and more importantly, past data — to develop a range of where their willingness to pay likely is. It won’t be exact, but you can get close.
  3. Buyers WILL NOT tell you the truth. It’s in the buyers’ best interest to get the lowest price possible. The fact that they are complaining about your price doesn’t necessarily mean they are willing to pay less. It just means that they are doing everything they can to obtain a discount.
  4. You CAN influence willingness to pay. It’s true that you probably can’t affect willingness to pay much when the deal is at the negotiation stage. But the actions you take today will definitely affect willingness to pay tomorrow. And the smart money is on influencing the market rather than just accepting it as it is.

As we already mentioned, systematically measuring and influencing customers’ willingness to pay at-scale — even just a tiny bit — can mean huge improvements to the bottom line.

Of course, the first step is realizing it’s possible. But once you’re over that hurdle, it’s just a matter of putting a plan into action.

If you’re ready to stop believing these myths, check out the webinar Getting Them to Pay More. It takes you behind the scenes to show you how buyers’ evaluate prices. And it offers proven strategies that other organizations are using to influence the prices customers are willing to pay.

We know that it’s possible to get customers to pay more because we’ve seen other B2B firms do it. Don’t let your organization be the one that’s left behind.

Get Immediate Access To Everything In The PricingBrew Journal

Related Resources

  • Using Pricing Analysis to Drive More Growth

    Pricing analysis capabilities are usually only focused on pricing. But pricing isn't the only thing the analytical processes and underlying data can be used for. In this on-demand webinar, you will learn how answering other powerful questions can increase your impact and internal profile.

    View This Webinar
  • Manage Your Customer Mix to Improve Profits

    It's natural to assume that you need to raise your prices or lower your costs to improve gross margins. But there's another powerful variable in the equation that can help grow profits.

    View This Tutorial
  • The Functional Area Cheat Sheet

    A quick overview of the common ways different internal groups can have an effect on pricing outcomes and suggestions for how you might be able to diplomatically help them help you.

    View This Tool
  • Fighting Over-Discounting in the Field

    Over-discounting in the field is a frustrating reality for most B2B pricing teams. So, how do you prevent it from happening? In this Expert Interview, Chaz Napoli shares the strategies and tactics he's found to be effective through hundreds of customer engagements.

    View This Interview