What method do you use to decide pricing for your product most often?
Ajinkya Bhat | Notion X Startups
22 replies
Do consider competitor prices (competitive pricing?) or use value-based pricing or other methods?
How do you optimize to not leave a lot of money on the table?
Replies
George Aleesu@rhexai
Value-base pricing should be best option, but then critical and regular updates and analysis of competitor pricing could give much leverage.
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@mraleesu @ajinkya_bhat Absolutely! Creating a premium I also believe put you far ahead of the competition, especially, being able to identify your unique value preposition and getting customers to become reliable and loyal funs. That's definitely an asset to an organization.
value-based is great. Sometimes its tough to figure out though.
Taking a look at competition is always a good starting point.
@drewsalesplaybookbuilder Value-based==My preferred way as well!
But don't you feel sometimes pricing with respect to the competition risks leaving money on the table?
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Hey! That's a great question. I use a value-based pricing approach for my products. This means that I set my prices based on the value that my products provide to my customers. I do this by conducting customer surveys and interviews to understand the needs and pain points of my target market. I also look at the prices of similar products on the market to get an idea of what customers are willing to pay.
@leo_henry1 I think this is the best way!
What about if you provide a value proposition that distinguishes from the competition?
Launching soon!
I guess I don't know about this :))
We considered competitive pricing and value-based pricing. But mainly it was a bunch of trial and error!
Also Graphite launched on Product Hunt and are close to product of the week if you want to check us out!
@carissajansen Already supported Graphite Carissa! All the best :)
I am launching soon to, you can check out StartOS :))
Would love to know your trial and error process btw! Do you raise prices and see conversion changes and then adjust?
The contents suggest that when determining pricing strategies, businesses should consider both competitor prices and value-based pricing to strike a balance that maximizes revenue and profitability.
Real-Life Example or Analogy: Imagine you are planning to buy a new smartphone. You come across two options:
Option A is priced significantly lower than Option B, but it lacks some advanced features that Option B offers. On the other hand, Option B is priced higher but offers better performance and additional features. In this scenario, you, as a consumer, need to consider both the competitor prices (Option A) and the value-based pricing (Option B) to make an informed decision about which smartphone to purchase.
Personally, I've found that a combination of competitor analysis and customer research is crucial when deciding on pricing. Understanding what the market is currently offering and what customers perceive as valuable helps me strike the right balance.
Looking forward to hearing your thoughts and experiences!
@gusoliveira_ I agree with the research aspect!
One of the reasons I popped this question I because I am considering pricing my product at 2-3x competing products!
Why? Value added services that create more benefits in the long term.
Recently came across this concept from Alex Hormozi, on how you can price your products higher, which may mean you get less clients, but you can get the best ones, and provide them premium service.
You end up serving a premium market, and it actually benefits the bottom line!
The most important metric is how much money it takes to make your product. Your MSRP should be a multiple that reflects covering your costs and then adding a healthy margin for profit, as well as a buffer for things like margin creep and potentially damaging fluctuations in the market, which will help during rainy days. I also look at comps and determine what makes my product better. Finally, if you're able to secure IP (hard to do in tech), that should also make your product more expensive because it's less likely anyone will be able to copy your tech -- making it more desirable since it stands out and differentiates.
Ultimately, however, you cannot get too heady with pricing because you still have to maintain attractiveness and competitiveness. You want to make sure that you haven't priced yourself out of the market.
One good metric I use is, "Would I pay this amount myself if I were shopping for a similar technology?" Be honest with yourself. If the answer is no, you have to cut your price down or separate/tier your product's offerings into varied/higher tiers. Or make your product have a la carte options in case someone doesn't need all you have to offer.
@chitterz Super!
One of the reasons I popped this question I because I am considering pricing my product at 2-3x competing products!
Mostly due to unique features, and the fact that I am packaging it differently.
It's still converting- almost like being in a market of one.
I did you the chopping into components parts / a la carte part, so that I did not price myself entirely out of the market as well- that seems to be working too!
For the "Would I pay this amount myself if I were shopping for a similar technology? part- I used to use this too!
And then I realised there were people who were willing to pay several times as much as me, because they had the same pain, just magnified 100x.
Water= $1
Water to someone about to die in the desert= $100 kind of a thing.
@ajinkya_bhat Until a water cottage industry pops up in that desert...and it will. And then you're screwed because you can't lower your price. It will destroy your company if you're racing to the bottom to stay competitive, what to mention of degrading your brand.
That's why you have to be very careful. Do you have patents? Patents are virtually impossible to defend in the tech world though...
My product is 6-7x more expensive than comps, but that's because there is NOTHING remotely close to my product out there. I've reinvented the pet bed -- it can convert into a piece of luggage, it has safety features, it has a hidden/integrated 3-season sleeping bag, it's got reflective elements for the campsite, its shoulder strap can convert into a reflective and tangle-free leash, there are compression straps to secure it when you roll the whole thing up, and there's even a mesh pocket for 32 oz water bottle. All on a pet bed.
My product is like having several products put together and is like 3 pet beds in one. I also use better materials than my competitors. My material strength is roughly 3x stronger and I employ expensive YKK zippers and Duraflex buckles - both of which are imported from Japan and Hong Kong, respectively.
I know at some point, there will be copycats, even though my product is patent-pending and I have better odds of being able to defend that product since I have a physical product. I'm also relying on brand equity (which I've been building for the last 5.5 years) to help me in case someone tries to steal my ideas.
Make sure your product is A) unique enough to justify your price, B) useful/relevant enough to justify your price, C) protected somehow, D) your brand is extremely trustworthy with airtight customer service, and is E) simply better than the rest.
Well, that'll depend the nature of your product, the target market, and the competitive landscape.
Here's what you need to do to avoid leaving money on the table and optimize your pricing strategy:
1. Conduct Regular Pricing Analysis.
2. Experiment with Pricing Strategies.
3. Segment Your Customer Base.
4. Leverage Upselling and Cross-Selling.
5. Monitor Competitor Moves.
6. Use Data Analytics.