Willingness to pay

The highest price a customer would accept for a product before choosing an alternative or going without.

Example

Customers renewing after a 10% price increase with no rise in churn.

Important

It is best shown by behaviour, such as accepted price increases, rather than by survey answers.

Related terms

  • Churn Rate — The share of customers or revenue lost over a period.
  • Gross margin — Gross profit - revenue less the cost of goods sold - expressed as a percentage of revenue. It asks whether the thing being sold makes money.

Lessons that explain it

  • The list price is a claim; the realised price is the evidence — Pricing diligence compares list prices with what customers actually pay, checks discounting patterns and looks for evidence that customers would accept higher prices. (10 min)

All 578 terms in the Investing glossary