Willingness to pay surveys are one the most common type of survey we field for clients.
They measure consumers’ willingness to pay for a new product or service concept (or one already on the market). This is a powerful kind of market research survey—especially for startups. It can help product teams and marketers estimate future revenues, justify production costs, and convince investors of an idea’s viability.
But what exactly does a willingness to pay survey look like? The short answer: Every willingness to pay survey is different, and how it’s designed depends on a few things. Namely:
- The novelty of your idea. Is there anything else like this on the market?
- The detail of your idea presentation. Are you showing respondents your entire product, or just explaining the general idea?
- Your sample size (number of respondents). Are you surveying 100 or 1,000 consumers?
Below, we list the various kinds of willingness to pay surveys, and explain how your answers to the three questions above can help you determine what kind of willingness to pay survey to use.
Willingness-to-pay: Open-ended
This one is as straightforward as it sounds. After presenting your product/service concept, ask respondents how much they’d be willing to pay for the concept, and leave it open-ended so they can type in whatever answer they want.
How much would you be willing to pay for [this product/service]?
Leave answer box open-ended
It’s a good idea to limit the types of characters respondents can use in their answers to positive integers only, and be sure to specify the currency.
If applicable, write “per month” or “per year” after the open-ended text box, so respondents give answers of the same type—you don’t want an undecipherable mix of per-month and per-year answers when analyzing this data.
This format works for most willingness-to-pay surveys, but is especially ideal for product/service concepts with existing substitutes (i.e. not a radically new product/service), surveys that present the concept in full detail, and surveys that may not get many responses (if you expect more than 400 responses, consider using a Van Westendorp instead).
Willingness-to-pay: Close-ended
This kind of question (same question text as the open-ended willingness-to-pay) asks respondents how much they’d be willing to pay for your product/service, then presents a set of possible answer options. These options are ideally presented in either ascending or descending order, and typically include between four and six options. Each option should seem like a reasonable price for your product/service, and they should be evenly spread around what you’d consider an ideal price for your product (i.e. the middle option is your target price point—enough to cover your costs)
How much would you be willing to pay for [this product/service]?
Provide 4 to 6 answer options
Close-ended willingness-to-pay is ideal for surveys that may not present the concept in full (because, for example, the product/service features may not yet be formalized), surveys that may not get many responses (i.e. less than 400), and surveys that present product/service concepts that are entirely new to respondents, such that they may not have a good sense for how much they’d be willing to pay because they have no reference for knowing how much this might cost.
Van Westendorp
A Van Westendorp is a set of four open-ended questions. They should be asked immediately after presenting your product concept. They go like this:
1. At what price would you consider [this product/service] to be so expensive that you would not consider buying it?
2. At what price would you consider [this product/service] to be priced so low that you would feel the quality couldn’t be very good?
3. At what price would you consider [this product/service] starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it?
See AlsoHow a Bitcoin Transaction Works4. At what price would you consider [this product/service] to be a bargain—a great buy for the money?
Leave all answer boxes open-ended
Each question should be followed by an open-ended text box.
Once you’ve gathered your responses, you can use respondents’ answers to these four questions to draw four price curves, ultimately revealing the optimal price range for your product (that is, the range of prices that are likely to maximize your revenues). It should look something like this:
Don’t let that graph scare you. It’s not expected that anyone but a seasoned data analyst can create that kind of graph—we often generate these for our clients, based on the responses we gather for them. If you don’t have the time or budget for this kind of graph, the simple average to each of these four questions can go a long way toward helping you uncover your target market’s willingness to pay for your product or service
Van Westendorp is ideal for product/service concepts with existing substitutes (i.e. not a radically new product/service), surveys that present the concept in full detail, and surveys with more than 400 respondents.
Expected Cost: Open-ended
This kind of willingness to pay question set asks about what respondents would expect to pay—not what they are willing to pay. It should be asked immediately after the concept presentation, and it goes like this:
How much would you expect this product/service to cost?
Leave answer box open-ended
Follow this with an open-ended textbox. And it may make sense to add “per month” or “per unit” to the end of that question, depending on the details of your concept (i.e. if it’s a subscription-based product or service).
Expected cost (vs. willingness to pay) questions work for any kind of product/service concept, but the model is especially ideal for new or novel product/service concepts. If consumers have no (or very little) idea about how much your product/service costs, they aren’t going to have a realistic answer for how much they’d be willing to pay. With brand new products/services, your first step needs to be gauging consumers’ expectations for how much something like this might cost. This range will guide your thinking and research later on about the optimal price to charge.
For example, if you’re bringing a new soft drink to the market, consumers will have a good sense of how much they are willing to pay because they know how much they typically pay for other soft drinks. If your product sounds delicious, they might be willing to pay a little more than they typically would (say, $2 per bottle) for a soft drink of this size.
But if you’re product is something totally unheard of—say, a robotic personal assistant that follows your customers around and completes basic tasks for them—respondents won’t have a clue how much they’d be willing to pay. Some who really love the product and have every intention of buying one may say $1,000 because they believe that’s more than enough to pay for one. Others who are equally as excited about the concept may say $1 million because they (probably more realistically) believe the product would cost just about that much if it were available in stores. But then others will be more precise and say exactly how much they’d pay for this product with no consideration of how much it might cost—expected cost may not enter into their equation (these are actually the responses you’d want to focus on in a willingness to pay survey, but unfortunately there’s no telling which ones those are).
So it’s best, in these cases, to separate expected cost from willingness to pay and focus on just one—in this case, expected cost.
Expected Cost: Close-ended
This is similar to open-ended expected cost, except that rather than an open-ended textbox, you provide answer options for respondents. And rather than ask “How much would you expect this to cost?”, ask this:
How much would you expect [this product/service] to cost?
Provide 4 to 6 answer options
There aren’t many cases where this is preferable to an open-ended expected cost question. But the most prominent use-case is when you’re limited in the possible price points you can charge (i.e. you’re selling an online course via a platform that allows only a fixed number of possible prices). Though even in these cases, it still may be preferable to keep the question open-ended and make your decision based on your analysis of these open-ended responses.
These are a few of the more popular ways to gauge willingness-to-pay in a market research survey. There are other more complicated formats, but it can be difficult to know when to apply these formats given the specifics of the product/service being presented, the sample size, and the decisions that need to be made using this survey data.
PeopleFish analysts review every one of our clients’ surveys, and we will make a recommendation for the best way to ask about willingness-to-pay based on the specifics of each individual project. To get started with your market research project, leave your email below.
