Marketing Compost (EAWAG) - The Water, Sanitation and Hygiene

Willingness and ability to pay
A compost producer in South-East Asia said ‘customers are willing to pay for
our compost because of our proven performance, quality assurance, reliability,
and transparent pricing policy’.
Table 4.3 reveals that customers must always want or need your product and be
both willing and able to pay for it.
Ability to pay is related to people’s financial situation, including their income and
access to credit. It may also be related to seasonal flow of finance, or even decision-making
power. Ability to pay is a relatively fixed figure, although providing
credit or flexible terms of payment can increase it.
Willingness to pay is a more flexible concept, as it is partly dependent on priorities
and perceptions. It reflects the appreciation for a product rather than a real
market price. Willingness to pay can increase through education, but can also
be damaged by bad reputation. In Section 2.2 we deal with a list of reasons why
marketing is of particular importance to composting businesses. Many reasons
relate to quality concerns, competition with other products and stigmatisation
of waste-derived compost. Since these factors affect people’s willingness to
purchase compost, they need to be well understood and tackled through marketing.
These issues are also vital for pricing decisions discussed in detail in
Section 6.2.
The following diagram illustrates the willingness and ability to pay relative to
production costs for four scenarios, described below.
WTP
Price
ATP
WTP
PC
ATP
PC
Loss
WTP
Viability
Problem
PC
ATP
WTP
ATP
Misunderstanding
PC
Ability
to Pay
Willingness
to Pay
Production
to Costs
Case 1
Case 2
Case 3
Case 4
Figure 4.1: Evaluation of willingness and ability to pay
Marketing Compost—Market assessment 45