Pricing Your Product

Pricing Your Product

February 10, 2021 by investor

Pricing the product or service is a key step in running a startup.

There are four pricing strategies to choose from:

1. Premium pricing is a price at the upper end of the scale and is used to attract higher-end users. The profit margins are greater here.

2. Low-cost pricing is a price at the lower end of the scale and is used to attract customers in volume. This gives you the greatest market size to sell to.

3. Skimming pricing is setting the price high at the beginning and then gradually lowering the price to capture new customers who could not afford the original price.

4. Penetration pricing is setting the price below cost to obtain market share.

Once you’ve chosen your pricing strategy, you then set the specific price with one of the following:

– Cost-plus pricing is setting the price as a calculation of the cost of making and delivering the product plus a margin.
– Value-based pricing is setting the price based on what value the customer perceives it brings regardless of the cost to build.
– Dynamic pricing is setting the price based on how much or how often the customer uses the product.
– Loss-leader pricing is setting the lead product price low to attract customers and set follow-on product prices high to capture the margin.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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