What is Willingness to Pay?

Willingness to pay (WTP) is the maximum amount an individual is willing to hand over to procure a product or service. The price of the transaction will thus be at a point somewhere between a buyer's willingness to pay and a seller's willingness to accept.

If a company understood customer willingness-to-pay before any negotiations commenced, they could develop strategies to realise that price during the negotiation.

Salespeople rely on their experience and selling skills to draw out this information using historical data and value-based pricing methodologies to understand how a customer values their products.

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