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How WTP Works (in simple terms)

WTP (What’s The Price) helps you understand and calculate product prices by breaking them down into their underlying cost components. Instead of relying on assumptions or supplier input alone, WTP uses real market data and structured cost models to build up prices from the ground up. In this article, you’ll learn how WTP works step-by-step.

When should you use this?
This overview is useful when you:

  • Start working with WTP for the first time.
  • Want to understand how price calculations are built.
  • Need to explain WTP internally (e.g. to colleagues or stakeholders).
  • Want to trust and validate the output of your models.

 

The 3 core steps of WTP
At its core, WTP always follows the same logic:

  1. Input: Market data
    WTP starts with external data that reflects monthly market conditions. This includes: commodity prices, indices, freight rates and indices, Industry Cost Profiles.

    This ensures your analysis is always market-based and up to date.

  2. Calculation: Cost Models
    Next, WTP translates this data into a product cost using cost models.

    A cost model defines: which cost components are revelant? How do these components behave? How are they calculated?.

    For example: Direct material cost = commodity price x nett weight.

  3. Output: insights & results
    Finally, WTP generates insights that you can use in practice.

    You can:
    1. See a full cost breakdown.
    2. Understand which factors drive the price.
    3. Track how prices change over time.
    4. Compare expected vs supplier pricing.
    This is where WTP turns data into actionable insights.