WILLINGNESS TO PAY SURVEYS FOR SETTING PRICES FOR REPRODUCTIVE HEALTH PRODUCTS AND SERVICES A User’s Manual Karen G. Fleischman Foreit James R. Foreit POLICY Project FRONTIERS The Futures Group International The Population Council This publication was made possible through support provided by the U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID) under the terms of … 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. Two types of sales data are suitable for this analysis: Panel data (purchase data reported by customer panel) Store scanner data (historical sales records) Advantages: 4. How to measure willingness to pay. Whether you're new to the industry or an established brand, the market has an impact on WTP. A total of 64 commissioners and other decision makers completed the DCE. Van Westendorp is ideal for product/service concepts with existing substitutes (i.e. 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. There aren’t many cases where this is preferable to an open-ended expected cost question. Willingness to Pay (WTP) surveys are used in the economic valuation of lending projects and in the development of water pricing, tariff setting and subsidy policies, including the design of pro‐poor contracts with public or private operators. 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. 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. The Oxford Encyclopedia of Economics refers to “willingness to pay” as the maximum amount that an economic agent is willing to pay to acquire a specified good or service. 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. Reasons for using the CVM approach 13 Box 2. So let's just dive in on this. First used in environmental economics to measure the intangible value of environmental improvements, WTP has increasingly been used in health care economics. But what exactly does a willingness to pay survey look like? The survey results show that direct approaches are predominantly used in practice; this is probably due to their less costly application. He has years of experience helping startups and innovators survey their target market. Copyright © 1992 Published by Elsevier Inc. Journal of Environmental Economics and Management, https://doi.org/10.1016/0095-0696(92)90022-O. Nor, given the artificialness of the exercise, are their answers likely to reflect their actual behavior. The usual disclaimer applies. As a survey-based method that directly elicits respondents' willingness to pay (WTP), the contingent valuation method (CVM) is considered to be an appropriate method for valuing water quality improvements or other services, because the value of water quality improvements includes not only on-site use value but also non-use value (Wang et al. 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. not a radically new product/service), surveys that present the concept in full detail, and surveys with more than 400 respondents. 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. This one is as straightforward as it sounds. They measure consumers’ willingness to pay for a new product or service concept (or one already on the market). 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. 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. Additionally, its convenience and limits have already been clarified 1-3]. View all posts by Nick Freiling, Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Click to share on LinkedIn (Opens in new window), How to Present Your Product (or Service) Concept in a Survey. Willingness to pay surveys are one the most common type of survey we field for clients. Rather than accepting it as something inherently good or virtuous, in any economic model biodiversity needs to create or enhance some kind of value. You estimate future market behaviour based on past demand. the middle option is your target price point—enough to cover your costs). The impact of programmes on behavioural outcomes was prioritised, with participants willing to pay an extra £16,600/year if average … Introduction A fundamental premise of economic science is that consumers have well-formed, stable preferences, an d that their choices reflect these preferences. Or when there is compelling community need that transcends either. surveys are frequently referred to as stated preferences (cf. These options are ideally presented in either ascending or descending order, and typically include between four and six options. 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. can be used to measure willingness to pay, and how we can verify the results of hypothetical survey decisions. 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. Demand estimation is predicting the overall size of the market or segment which a company chooses to serve. Brock and Xepapadeas (2003) argue that biodiversity is traditionally praised without measureable merit. In its scientific form, the concept applies to the products that are not priced based on the market rules. 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. How much are you willing to pay for that? Willingness-to-pay: Open-ended. In indirect surveys some sort of rating or ranking 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. They go like this: 1. Background: Willingness to pay is a valuation technique that has rarely been applied in mental health economics. These are a few of the more popular ways to gauge willingness-to-pay in a market research survey. 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. 4. ScienceDirect ® is a registered trademark of Elsevier B.V. ScienceDirect ® is a registered trademark of Elsevier B.V. This week, we'll show you two ways to measure willingness to pay: surveys and conjoint analysis. 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. This is in contrast to willingness to pay (WTP), which is the maximum amount of money a consumer (a buyer) is willing to sacrifice to purchase a good/service or avoid something undesirable. if it’s a subscription-based product or service). The second survey was designed to collect information on the possible changes in attitudes towards the ARTS due to having experienced the system and being informed by awareness-raising campaigns and to collect information on users' willingness to pay and their perception of safety, security and emergency management on board the ARTS. Finally, participants responded to var- ious items concerning environmental and political attitudes as well as socio-demographics (see SI-3 for survey items and SI-4 for the willingness to pay measurement). 2013). 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). To get started with your market research project, leave your email below. It should be asked immediately after the concept presentation, and it goes like this: How much would you expect this product/service to cost? In economics, willingness to accept (WTA) is the minimum monetary amount that а person is willing to accept to sell a good or service, or to bear a negative externality, such as pollution. Direct willingness to pay survey example. You'll see how one company, Adios Junk Mail, used surveys to better understand WTP. • compare survey measures of willingness to pay • construct indices to measure attitudes or opinions • use Cronbach’s alpha to assess indices for internal consistency • practise re-coding and creating new variables. They are quick, they are relatively cheap and sometimes they can give us very good information about that willingness to pay metrics. Each question should be followed by an open-ended text box. Copyright © 2020 Elsevier B.V. or its licensors or contributors. How much would you be willing to pay for [this product/service]? 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. This is similar to open-ended expected cost, except that rather than an open-ended textbox, you provide answer options for respondents. This kind of willingness to pay question set asks about what respondents would expect to pay—not what they are willing to pay. I am grateful to Ralph Braid, Thomas Finn, and Ronald Cummings for their suggestions. We conduct an empirical study to assess the relevance of common methods used to survey consumers’ willingness to pay (WTP) from practitioners’ perspective. Knowledge about a product’s willingness-to-pay on behalf of its (potential) customers plays a crucial role in many areas of marketing management like pricing decisions or new product development. 2. Sampling strategy in peri-urban communities, Dar es Salaam 28 Box 4. Nick is the Founder/CEO at PeopleFish. This corresponds to the standard economic view of a consumer reservation price.Some researchers, however, conceptualize WTP as a range. This European study does not assess willingness to pay because vaccine provision is more likely to be paid by the public health system. Working out the sample size 23 Box 3. If this is true, then it is possible to deduce from choice behavior , or from carefully phrased direct questions about preferences, whether … Surveys or many respects the easiest way to measure willingness to pay. The development of methods to measure willingness to pay (WTP) has renewed interest in cost-benefit analysis (CBA) for the economic evaluation of health care programs. 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? But the most prominent use-case is when you’re limited in the possible price points you can charge (i.e. We use cookies to help provide and enhance our service and tailor content and ads. Annex D Example willingness-to-pay questions for CVM Survey 217 Annex E Data entry table 222 Annex F Financial sustainability analysis 224. xi List of boxes Box 1. This one is as straightforward as it sounds. At what price would you consider [this product/service] to be a bargain—a great buy for the money? Louviere et al., 2000, p. 20 ff.). 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. With brand new products/services, your first step needs to be gauging consumers’ expectations for how much something like this might cost. At what price would you consider [this product/service] to be so expensive that you would not consider buying it? 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. Willingness to pay is a lousy direct question to ask respondents, who tend to lowball their answers, in effect bargaining rather than answering accurately. 1: Market data analysis. There are four methods of measuring WTP with unique advantages and disadvantages. 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. It centered on willingness to pay (WTP) and why it’s so critical. 3. An online discrete choice experiment (DCE) was used to survey commissioners and decision makers in the UK to assess their willingness-to-pay for childhood obesity programmes. 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