Willingness to Pay: An Important Marketing Consideration for Services

Willingness to Pay: An Important Marketing Consideration for Services

While certain marketing concepts traditionally thought of as being more useful for products can also be applied to services, the converse is also true. A marketing concept called willingness-to-pay (WTP), in spite of its many limitations, can be applied to both services and product marketing. WTP applies econometric and scientific principles to examine the price that a customer might pay for a good/service, including variations of and/or continuation of that product/service over the long haul. It has its drawbacks in that the service might end up exceeding or falling short of expectations once delivered, but it still gives us an idea of whether it is feasible to offer a service and if so what price it can be offered at so that it is indeed profitable, sustainable, and worth the effort to develop it, given various alternatives that could be derived and delivered by the business.

Tsao et al studied willingness to pay for medication management services provided by pharmacists as discerned through a survey of panel respondents.1 Overall, 93% of respondents felt that the medication advice from their pharmacist resulted in improvement in patient outcomes and/or medication use. This was selected as the "best" attribute of medication management, while other preferred attributes of medication management included being able to obtain an appointment with the pharmacist on the same day or via walk-in, improved patient-physician relationships, and medication management sessions able to be completed within 15 minutes. The average willingness-to-pay for medication management was $24.55 during this study conducted in 2015. Younger males with higher household income and those who had experienced some aspect of medication management services in the past were willing to pay more for these services out of pocket. The study concluded that the accessibility of pharmacists was valued highly by respondents who, overall, were supportive of medication management services and recognized the potential of pharmacists' involvement in drug therapy management to improve patient outcomes and medication use.

The study reviewed here tells us several things. It tells us what patients might be willing to pay out of pocket, which is the total amount they are willing to pay whether or not insurance also sponsors part of that cost. The WTP point might be less than what can be offered unless insurance covers a good portion of the costs, leaving patients with, for example, a $20 copay. It also suggests which aspects of the service might be its most marketable attributes and who might be more amenable to pay more for those services, and in that respect is says much about how to plan for, implement, and tailor both the service and the marketing strategies that accompany it.

Additional information about Marketing Foundations and Value-Added Services as a Component of Enhancing Pharmacists’ Roles in Public Health can be found in Pharmacy Management: Essentials for All Practice Settings, 5e.

1Tsao NW, Khakban A, Gastonguay L, et al. Perceptions of British Columbia residents and their willingness to pay for medication management services provided by pharmacists. Can Pharm J (Ott). 2015;148:263-273. 

Authored by:

Shane P. Desselle, RPh, PhD, FAPhA, Professor of Social/Behavioral Pharmacy, Touro University California.