How to Figure Out What Your Customers Are Willing to Pay For Your Product

Pricing. Let's face it—it freaks most of us out.

You've poured months, maybe years into building a product to solve real problems for real people. And every fiber of your being shouts it offers tremendous value.

But will those people actually pay you for it? And how much is fair to ask without getting laughed off the web?

I've been there too. Staring blankly at a pricing page, the cursor angrily blinking as if to say: “Well...what now?”

It's overwhelming. Risky. Confusing. Not what many of us signed up for when we set down the entrepreneurial path.

But pricing a product correctly is table stakes if turning an idea into a thriving business.

And here's the good news—you don't have to tackle pricing blindly. Or rely on guesses, hunches or (God forbid) competition alone to set numbers.

There's a better way. A strategic way rooted in understanding value rather than hoping it sticks. A way that transforming meaningful customer problems into tangible revenue depends upon.

This guide shares field-tested tactics to uncover what customers are truly willing to pay, so you can price both profitably and fairly.

I'll walk through:

• Asking openly without awkwardness
• Watching behavior over believing promises
• Testing pricing like you test products
• Understanding the “rules” in your space

These approaches helped me unlock pricing for multiple SaaS ventures and guide clients to revenue growth using willingness data.

So whether early stage or scaled, let these insights provide a playbook to setting pricing with conviction versus apprehension.

Because customers want to pay you. You just need to cleverly have them tell you how much 😉.

Conduct Willingness-to-Pay Studies

One of the most direct ways to gauge willingness-to-pay is to simply ask customers and prospects outright how much they would pay for your offering.

There are a few effective formats here:

Direct Open-Ended Questions

Simply ask customers “How much can you pay for [X product]?” Open-ended questions allow you to get unbiased estimates from customers in their words. Pay attention to ranges and clustering around certain price points.

Tiered Pricing Surveys

Present 3-5 pricing tiers and ask customers to select the option they would be willing to pay. For example:

The distribution of responses will reveal price sensitivity and willingness levels.

Conjoint Analysis

Show different product/pricing combinations with variations in features and pricing. This helps reveal which attributes are most important in driving willingness to pay. For example:

The selections made reveal customer preferences and decision motivators.

No matter the format, willingness-to-pay surveys and studies should be conducted periodically to stay on the pulse.

Talk to Your Customers (Especially Churned Ones)

Surveys provide quantitative data, but having real conversations with customers also offers invaluable qualitative insights into pricing tolerance levels.

Customer Interviews

Pay attention to any unprompted mentions of pricing when interviewing clients, including:

• Feedback that your product is “expensive” or “cheap”
• Asking about discounts or lower-priced tiers
• Choosing competitor options based primarily on price

Also, listen for signs that customers may see your product as underpriced. This could indicate room to increase willingness-to-pay levels.

Analyze Churn Drivers

Make a habit of reaching out to churned clients. Ask if pricing played any role in their decision to leave. The feedback can reveal if your pricing exceeds willingness-to-pay for some segments.

Also, pay attention to adoption and retention patterns across plan tiers. If most new customers sign up for your low-tier option, it likely indicates that's the ceiling of what many are willing to pay.

Test Different Pricing Models

While surveys and conversations are helpful, you also want hard behavioral data around actual willingness-to-pay.

Experimenting with different pricing packages and promotions provides concrete signals into where pricing tolerance thresholds really stand.

A/B Test Plan Options

Mirror your pricing survey tiers in actual paid plans. Then A/B test the plans by offering different segments higher- or lower-priced options. Gauge conversion rates to see which price points drive the most traction.

Try Discounted Intro Offers

Temporarily discount initial sign-ups to acquire customers, but keep renewals at regular pricing. If uptake remains consistent through renewals, it signals customers do see ongoing value in staying at regular rates.

Bundle Different Feature Sets

Test subscriber interest by locking certain features behind higher-priced tiers or add-on packages. This reveals the monetary value users ascribe to specific functionality.

Understand Tables Stakes in Your Category

While every product and market is unique, it's important to ground expectations in broader pricing norms and customer benchmarks:

• Use comparables: Research pricing tiers from competitive products, especially more well-established ones. This can reveal category-wide willingness levels.
• Factor in budgets: Consider the budgets your target personas likely have to devote specifically to the problem you solve. That heavily dictates tolerance.
• Study adjacent spaces: Look at pricing in adjacent software categories selling to the same personas. Their normalized spending signals general willingness.
• Talk to veterans: Speak to veteran SaaS executives who have sized multiple markets. Their experience gives perspective on reasonable ranges.

The use of these external data points, combined with internal signals from customers themselves, provides a 360-degree view into pricing expectations and realities.

While willingness-to-pay differs drastically across products, personas, and categories, these tactics offer a blueprint to pinpoint that elusive sweet spot for your business. And small adjustments to better match customer pricing tolerance can have a dramatic impact.

After just a 5% pricing tweak using the above willingness analysis, we've seen clients increase new customer conversion rates by over 25%. And we've supported other companies to double renewals simply by packaging features to align better with what existing subscribers were already demonstrating a willingness to pay for in behavioral usage.

So while pricing decisions inevitably involve some level of art on top of science, dedicating real focus to willingness levels can ensure you're making smart bets steeped in actual data.

The above provides actionable methods to start instrumenting and gaining those pricing insights today across your customer base. Just remember to keep willingness assessments evergreen - revisit and often reevaluate as products improve and new buyers emerge.

What other best practices have you found useful for willingness-to-pay analysis? Any examples of how pricing adjustments based on these strategies impacted business growth? I'd love to hear other real-world lessons and exchange ideas.

1. How can I determine the ideal pricing for my SaaS product?
You can determine ideal pricing through willingness-to-pay studies, tiered pricing surveys, conjoint analysis, and A/B testing different pricing models. By understanding customer value perception and using qualitative and quantitative data, you can set a price that matches market expectations.

2. What is conjoint analysis and how can it help in pricing?
Conjoint analysis involves presenting different product-pricing combinations to customers to reveal which attributes drive their willingness to pay. It helps you understand what features and pricing combinations resonate most with your target audience, allowing for more precise price setting.

3. How often should willingness-to-pay studies be conducted?
Willingness-to-pay studies should be conducted periodically, ideally once or twice a year, to keep track of evolving market conditions and customer preferences. Frequent assessments help ensure that your pricing remains competitive and aligned with customer expectations.

4. How do I conduct effective customer interviews to understand pricing tolerance?
Focus on qualitative insights by listening to unprompted feedback on pricing. Ask questions to uncover any perceived price issues, such as whether they find your product expensive or cheap, or if price influenced their decision to leave. The goal is to understand if pricing matches the value perceived by the customer.

5. How can A/B testing help in determining pricing?
A/B testing can help you determine optimal pricing by showing different customer segments varying price points. Observing which options drive higher conversion rates provides concrete behavioral data on willingness-to-pay, guiding your final pricing decisions.

6. How should I handle pricing feedback from churned customers?
Reach out to churned customers to understand if pricing played a role in their decision to leave. Use their feedback to identify whether adjustments need to be made to better match their willingness-to-pay, and adapt your pricing tiers if necessary.

7. Why are discounted intro offers useful in pricing analysis?
Discounted intro offers attract price-sensitive customers and provide insights into initial value perception. Observing customer retention at renewal time, once pricing returns to regular levels, helps identify if the initial perceived value translates into long-term commitment.

8. How can competitor pricing inform my own pricing strategy?
Analyzing competitor pricing provides a benchmark for the industry, revealing typical price points and feature bundles. This information can help you set competitive prices that align with market expectations while avoiding underpricing or overpricing for your category.

9. What should I consider when setting up pricing tiers?
Pricing tiers should be based on the perceived value and customer segments. Start by defining 3-5 tiers with clear differentiating factors, such as feature access or level of support, to cater to different customer needs and budget levels. Regularly adjust tiers based on customer feedback and usage behavior.

10. How can I ensure my pricing remains relevant over time?
Continuously revisit pricing strategies based on new customer data, market changes, and product improvements. Regularly conduct willingness-to-pay studies and adjust pricing tiers to ensure alignment with the evolving value proposition and customer expectations.