Willingness to pay
Once the target audience is selected, implementers need to understand everything about these potential consumers. Implementers need to understand not only consumers' ability to pay but also their willingness to pay. WTP studies help implementers understand the implications of a product's price. In 2005 PSP-One conducted a seminar on WTP to discuss tools that can be used to make decisions about increasing or setting prices for health products in developing countries. The Foreit tool is one of the most commonly accepted among MDA practitioners to understand what prices can be set. See Willingness to pay surveys for setting prices for reproductive health products and services.
However, WTP does have limited applicability as additional information may also need to be collected. The key to using the WTP tool is understanding which data is sought and ensuring that the study obtains that data. For instance, PSI uses WTP studies as a basis of segmentation, by analysing the access and psycho-social determinants of consumption. However, decisions are not based on this data alone and it needs to be situated within other identifiable WTP determinants. WTP can also highlight a "price gap" between very low priced products and commercial products. For instance, PSI used WTP to make the decision to increase condom prices in South Africa to improve cost-recovery.
Most implementers agree that WTP alone is not necessarily a reliable indicator of what people would do if the prices went up. An examination of other barriers, other market activities, other players, alternatives, etc, would also be required to get the full picture. Revealed data - data obtained from analysis of consumer behaviour faced with a number of products on the market at a range of price points - is the approach usually taken by the commercial sector. It provides an even more reliable indicator of willingness to pay because it reflects the behaviour of the consumer when faced with a choice, and ultimately, this is what marketers need to know. However, programmatic constraints and branding biases can cloud results. Collecting revealed data can also be very expensive.
However, WTP does have limited applicability as additional information may also need to be collected. The key to using the WTP tool is understanding which data is sought and ensuring that the study obtains that data. For instance, PSI uses WTP studies as a basis of segmentation, by analysing the access and psycho-social determinants of consumption. However, decisions are not based on this data alone and it needs to be situated within other identifiable WTP determinants. WTP can also highlight a "price gap" between very low priced products and commercial products. For instance, PSI used WTP to make the decision to increase condom prices in South Africa to improve cost-recovery.
Most implementers agree that WTP alone is not necessarily a reliable indicator of what people would do if the prices went up. An examination of other barriers, other market activities, other players, alternatives, etc, would also be required to get the full picture. Revealed data - data obtained from analysis of consumer behaviour faced with a number of products on the market at a range of price points - is the approach usually taken by the commercial sector. It provides an even more reliable indicator of willingness to pay because it reflects the behaviour of the consumer when faced with a choice, and ultimately, this is what marketers need to know. However, programmatic constraints and branding biases can cloud results. Collecting revealed data can also be very expensive.
