How do I price my product?

Hey Founder, have you thought about the price of your product yet? 🤔 👇

Monetisation is undoubtedly the biggest driver of growth for any business. Yet, it’s the variable most companies are nervous to play with, fearing losing customers (if prices are too high) or having a reputation issue (if prices are too low). So what happens is that value and money is in most cases left on the table.

There are several pricing strategies when it comes to the theory of pricing, but, to keep it very simple, we can either start from cost and add our margins (cost plus strategy) or look at the value we generate for our customers

For most startup businesses that are pricing innovative products, the only viable option is to look at the value your product / service is generating for your customer (unless you want to leave tons of money on the table using a cost plus approach..)

Dolan and Simon in their book “Power Pricing” (recommended if you want to get into the theory of pricing!) tell us that “price is the sacrifice a customer makes to acquire a product or a service. The customer always compares this sacrifice with their perception of the product’s value…A customer buys a product only if its perceived value is greater than the price”.

It’s that simple.

That gap, between the price and perceived value of the product, is the incentive for a consumer to buy your product and it’s vital for your growth.

Value is the keyword. So you shouldn’t even start looking at pricing if you haven’t:

- Thoroughly built your value proposition and you’re clear on what customer’s pains and problems you’re addressing and resolving, and what are the benefits the customer will get from using your product

- Looked at your competitive landscape and you’re clear on what truly differentiates you from your competitors

If you’re asking yourself “I am clear that I have to use value-based pricing, but what does that mean in practice and how do I do that?”, we will provide you with some practical tools on how to go about it in future posts, so stay tuned!

In the meantime, look back at your value proposition and your competitive analysis so you will be ready to use value-based pricing to price your product/service.

And if you need help with monetisation or pricing, our team of experts can help you. Book a free chat with us so we can explore how we can help.