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

Case 1: If willingness to pay is higher than production costs and compost is
priced accordingly, the business is likely to make profits.
Case 2: Willingness to pay is lower than production costs but the ability to pay
is high. This indicates a lack of appreciation for the product. Find the reasons
and improve willingness to pay by promotional activities and education.
Case 3: Ability to pay must be higher than production costs; otherwise it will
be impossible for your business to ever cover costs through sales alone. If customer
ability to pay is below production costs, either reduce the costs or look
for new customers and other income opportunities (e. g. subsidies).
Case 4: Data suggesting that willingness to pay exceeds ability to pay should
be viewed with caution. In such a case, respondents have either not understood
the question or have accounted for some other factors in their answer
(e. g. subsidies).
Key considerations for willingness and ability to pay
Are customers willing to pay the present price of compost
– Why/why not Understanding the reasons can help you understand how
to increase customer willingness to pay, i. e. education, promotion etc.
– What would make them more willing to pay for compost or willing to pay
a higher price
How easily are the customers able to pay the present price of compost
– Knowing what customers are able to pay can help you develop products
or product units (quantities) affordable to specific segments.
Are customers able to purchase as much compost as they want at this
price
– If customers are limiting the amount they purchase because they are unable
to pay the price, your business could benefit by lowering the price
and, thus, increase sales.
46 Marketing Compost—Market assessment