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What is Willingness To Pay?

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Willingness to pay is the price range that a customer is willing to pay for a product or service at a particular time and place. It is a basic concept of price economics that has implications for marketing in areas such as pricing, branding and sales. The following are factors that are known to impact willingness to pay.

Businesses vs Individuals

In many cases, businesses are willing to pay more than individual customers. For example, airlines make great efforts to charge business travelers more with yield management techniques.


An individual's income, disposable income and wealth.


Enthusiasts for a particular product may be willing to pay more than those who view a product with indifference.


In many cases, customers are willing to pay more for products that align with their values. For example, a customer may be willing to pay more for solar electricity than electricity generated with a fossil fuel.

Value Proposition

The value that is offered by a product or service. For example, a dog walking service may represent freedom and be extremely valuable to some customers.


A brand that is able to instill positive emotions may command a higher price point as customers purchase with emotions as opposed to cold logic. For example, a pleasing customer experience may lead to emotions such as gratitude that make a customer less price sensitive towards a business.


Quality such as durability tends to command a higher willingness to pay.

Reviews & Recommendations

Social information such as recommendations and reviews. A primary factor in industries driven by reputation systems such as the hotel industry.

Brand Recognition

Customers may be willing to pay more for a brand simply because they recognize it.


If you're stuck at the airport with nothing to drink, you may be willing to pay more for coffee. Brands may avoid charging more in this situation as it can build a sense of resentment. Charging more in a desperate situation such as a disaster is ethically questionable and potentially a compliance issue.
Overview: Willingness To Pay
The price range that a customer is willing to pay for a product or service at a particular time and place.
Related Concepts


This is the complete list of articles we have written about pricing.
Algorithmic Pricing
Bargaining Power
Benchmark Price
Price Fixing
Cost-plus Pricing
Price Gouging
Customary Pricing
Decoy Effect
Everyday Low Price
Marginal Utility
Willingness To Pay
Dynamic Pricing
High-Low Pricing
Market Value
Flat Pricing
Loss Leader
Predatory Pricing
Price Discrimination
Snob Effect
Market Price
Price Competition
Price Leadership
Premium Pricing
Price Economics
Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
Pricing Power
Pricing Strategy
Sticky Prices
Value For Money
More ...
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Price War

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Premium Pricing

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Sticky Prices

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A definition of commoditization with examples.

Too Cheap To Meter

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Relative Price

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An overview of dumping with an example.

Value vs Price

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Market Value

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Competitive Market

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