Willingness to Pay
Willingness to Pay (WTP) is the maximum amount a customer would spend for your product or service. It is determined through research — surveys, interviews, and behavioral analysis — and varies by customer segment, use case, and perceived value. Understanding WTP is the foundation of effective pricing strategy.
Why Willingness to Pay Matters for SaaS Companies
If your price is above WTP, you lose deals. If your price is far below WTP, you leave money on the table. Most SaaS companies price based on intuition or competitor benchmarking, resulting in prices significantly below actual WTP. Research shows the typical SaaS company captures only 50-70% of their customers' willingness to pay.
An Operator's Take
I run WTP research in the first month of every pricing engagement. The method is simple but revealing: ask 20 customers four questions (the Van Westendorp model): at what price is this too cheap to be credible, at what price is it a bargain, at what price is it getting expensive, and at what price is it too expensive? Plot the responses and you find the acceptable price range. Every time I have done this, the 'getting expensive' point is 30-50% higher than the current price. Most founders dramatically underestimate what customers will pay.
Common Mistakes
What I see go wrong at Seed to Series B companies.
Asking customers directly 'what would you pay for this?' People are bad at answering direct price questions. Use structured research methods like Van Westendorp.
Assuming one WTP for all customers. Enterprise customers might have 5x the WTP of SMB customers for the same product.
Not re-researching WTP as your product improves. WTP increases as you add features, integrations, and proven results.
What to Do This Week
Concrete steps you can take right now.
Run a Van Westendorp price sensitivity study with 20 customers. It takes 30 minutes per interview and reveals your acceptable price range.
Segment WTP by customer size, industry, and use case. Price your tiers based on segment-specific WTP.
If your current price is below the 'getting expensive' threshold from research, you have room to raise prices safely.
Related Resources
Try These Tools
Frequently Asked Questions
How do you measure willingness to pay?
The most practical methods are: Van Westendorp Price Sensitivity Meter (4 questions about price thresholds, works with 20-30 respondents), Gabor-Granger (show specific prices and ask about purchase intent), and behavioral testing (A/B test different price points with real prospects). Van Westendorp is the fastest and most commonly used for SaaS pricing research.
Need Help With Pricing Strategy?
Most Seed to Series B companies are leaving money on the table. Let's figure out where.