Hi, everybody.
I know Thomas talked to you about willingness to pay, and you can imagine
that something you really want to find out when you're making a pricing decision,
how much of these customer's really willing to pay for what you're selling.
It's now time in the course to get down to the hard work of measuring this, and
we're going to start with surveys.
Why surveys?
Surveys or many respects the easiest way to measure willingness to pay.
They are quick, they are relatively cheap and sometimes they can give us very good
information about that willingness to pay metrics.
So let's just dive in on this.
So one way to try to find out willingness to pay, is just to ask people directly.
How much are you willing to pay for that?
And someone would say, hey, I know how much I'm willing to pay,
I'd pay $850 for that bicycle.
And that may be true, but when they answer the question,
they may have other things on their mind as well.
Think about it for a moment.
If you thought [SOUND], whatever answer I give might influence
the price that the individuals going to charge for it.
So if I really want to buy the object, whatever they happen to be selling,
maybe I should low ball them.
Telling them I'm willing to pay less.
And says, hmmm, better tell them I'm only willing to pay $500.
And maybe they'll lower the price.
So a couple of things come into play here.
One is exactly what we're talking about here.
People might shave the price down
with the hope that they can get a better deal on whatever you're selling.
It's also true that sometimes people don't really
know exactly how much they be willing to pay when you ask them on a survey.
And only when they get to the point of making a choice do they really discover
to themselves how much they'd be willing to pay for whatever they're looking at.
We're going to try to make this a little bit better in the survey.
We're going to try to get rid of at least this problem
that we're talking about right here.
How are we going to do that?