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 a detailed price calculation. In this article, you’ll learn how WTP works step-by-step.
When should you use this?
This overview is useful when you:
- Are working with WTP for the first time.
- Want to understand how price calculations are built.
- Need to explain WTP to colleagues or stakeholders.
- Want to validate and better understand your model results.
The three core steps of WTP
At its core, WTP always follows the same logic:
- Input: Market data
WTP starts with market data, such as commodity prices, commodity, various indices and freight rates. It combines this data with Industry Cost Profiles, which describe how costs are typically distributed within an industry.
This ensures that your analysis is based on current and historical market data. - Calculation: Cost Models
Next, WTP combines this data within a Cost Model to calculate the expected product cost.
A Cost Model defines which cost components are included, how much they contribute, and how they are calculated.
For example: Direct material cost = commodity price × net weight. - Output: insights and results
Finally, WTP turns the calculated data into practical insights.
You can:- See a full cost breakdown.
- Understand which factors drive the price.
- Track how prices change over time.
- Compare expected costs with supplier prices.
