Value-based pricing for your products

How do you actually calculate the value-based pricing for your startup products? 🏷 👇

We said it before, almost universally the most sensible approach to pricing is value-based pricing. Although this makes sense in theory, most of the startup founders we have helped were not sure how to actually go about it when we first met them.

This is the approach we have used with the many founders we have helped when it comes to coming up with a price tag using value-based pricing:

- First of all it’s very important to make sure we are clear about our beachhead market, the first segment we will focus on with our business. A clear definition of beachhead market (and customer persona attached to it) is paramount when it comes to the market opportunity and clearly articulating our go-to-market strategy, but it’s equally vital to determine a price that is based on the value generated by our product for the customer in the specific segment. If you’re thinking about pricing, you should be clear about what is the first market you are going to target, who is your persona (or brand hero as we like to call it!) and what specific pains and problems you’re resolving for them (through features / parts of your product). Different market segments will have different value-based price tags.

- The next thing we are going to do is dust off (hopefully it’s still fresh enough!) our competitive landscape analysis. We want to look at what is the next best alternative for the customer in our segment and how the competitor is pricing their product/service

- We then look at our secret sauce: what is unique in our value proposition? What is the feature that differentiates our product from the competitor’s offering and makes it defensible?

- The last thing we do is to clearly determine the value of our secret sauce and what’s unique: how much our brand hero will pay for our secret sauce? And the best way to determine this is by getting out of the building and talking to prospect customers

If we are struggling with any of the above steps or if we don’t think we have any next best alternative product to refer to (we would challenge that!) your best option is to sit down with your prospect customers in the beachhead market, articulate your value proposition to them and, only after taking them through the value and secret sauce, simply ask the question: how much will you pay for this product/service?

If we are still struggling to come up with a price tag, it means we need to go back to the drawing board and relook at:

- Beachhead market

- Persona / Brand Hero

- Value proposition

- Secret sauce

If you need help with pricing, our team of experts can help. We have helped dozens of founders with their pricing approach and their business foundations. Book a free chat with us so that we can explore together how we can help.