Simple pricing approach for new products
Start with a pricing model that reflects cost coverage, perceived value, and competitive positioning. Early pricing should help you learn about demand and willingness to pay.
Steps to set initial price:
- Calculate your cost base (production, delivery, marketing, support).
- Research competitor prices and positioning.
- Interview potential customers about value and budget.
- Choose a pricing strategy: cost-plus, value-based, or penetration.
Common strategies:
- Cost-plus: add a margin to your unit cost—easy but ignores value.
- Value-based: price based on the benefit to customers—higher potential.
- Penetration: set a low price to gain users quickly, then raise prices.
Test and iterate
Start with a hypothesis and test with real customers. Use A/B pricing on landing pages, limited-time offers, and pilot customers to gather data. Track conversion rates and churn closely.
Practical tips:
- Offer tiered packages to capture different customer segments.
- Use introductory discounts with clear end dates to avoid discount expectations.
- Communicate value clearly—features alone don’t justify price.
When to change price
Adjust prices based on customer feedback, cost changes, and improved product value. When increasing prices, grandfather existing customers or provide added value to ease the transition.