Play with price and pick one to start.
This is Post No. 7 in How to Start a Business Series.
You should price your product based on these factors.
- The value you provide.
- What are others charging for similar offerings in your industry.
- How polished or robust is your product and its user or customer experience
Also keep in mind that low pricing is not a smart strategy. Ideally, you should not be the lowest priced product in your segment.
I have written about premium pricing, how to charge more and disadvantage of running a cheap business earlier. Go check these posts.
Unless a low price can help you achieve huge scale you should not be going for a low cost pricing model.
A product that is priced cheaply is seen as a low quality offering.
Value Based Pricing: A Rational Approach to Product Pricing
In consulting, in products and also when in doubt – go for value based pricing. If your product can bring $100 value to your customer then price it at $30. This will make sure that your customer gets benefited, gets good value for her buck and comes back for more value. It’s a win-win, so sustainable.
For a SaaS product, based on your cost of user acquisition.
If your cost of customer acquisition is X then, a simple calculation can be –
Price of your product = X + Y (cost of churn spread across number of consumers) + N (a fix amount to be charged as an add on). This will make sure that you stay profitable.
While pricing a product or while bundling your service – do not give your users too many options. Because research has been done which suggests that fewer choices lead to higher sales.
Action for today: Now that you have already getting your product or service ready to deliver. Take time to figure out the value a customer will get after using your product or service. Add your costs and profits to it and decide on a price that you’d like to sell at.
