This article was originally published on a leading professional marketing blog, BloggerIdeas.com.
At the heart of any discussion about a startup’s product or services is the question of value. How much value does your startup’s solution provide for its clients? How many hours of work does it save them? Is it something they could do themselves or are your services unique? These questions determine not only if your startup will achieve profitability, but how much you can fairly charge for your services in the event that it does.
Pricing your company’s services is a delicate process that must take into account a multitude of factors. We spoke to seven successful founder’s at different stages in their careers and asked what their best advice was for accurately pricing a startup’s product and services.
1) Listen To Customer Feedback
There are tons of books, papers, studies out there on the internet that specifically discusses setting the right prices for the new product or services. Discussing it in general terms, one of the best ways to get the right idea about pricing is studying the industry from various aspects. That includes researching the closest competitor, doing general surveys and even analyzing closest substitutes in other industries.
Even after all of this, it all comes down to what your customers are willing to pay and the early adopters could be invaluable to get an insight on this. When we launched AskforTask, we got feedback from majority of our early adopters in beta mode that helped us in coming up with the right pricing.
Muneeb Mushtaq, AskforTask
2) Don’t Be Afraid To Experiment
Think of pricing as something fluid rather than fixed. As your product and your knowledge grow, don’t be afraid to experiment with price to help find the best balance between product demand, and income.
Mark Volkmann, Massagebook
3) Address Your Competitor’s Shortcomings
Find a hole in your competitor’s product offerings and come up with a package that is priced well for the unmet needs. The package has to have a compelling story in less than a minute. An example is, “For the same price that you would pay for others, you get more features and benefits with this product.”
Ken Rhie, Trumpia
4) Test Your Pricing
Test your pricing, don’t pick a number out of the ether and then stick with it blindly. At the beginning, you have to choose the price based on gut and brand strategy but the long term price point is ultimately determined by what consumers are willing to pay so it’s worth testing different pricing to find out exactly what that is.
Cameron Mclain, Challenge.Me
5) Find The Right Balance
Finding the right price really revolves around finding the threshold at which a critical mass of demand can catapult a startup into profitability and scalability. Price it above this threshold, and it will take too long (or, be impossible) to reach profitability and begin the process of repeating and scaling the business model. Price it below this threshold, and you’ll be losing out on cash flow and unnecessarily compressing your margins.
Allen Kors, Achieve Lending
6) Know The Industry
Pricing your products and services properly can greatly influence how much you sell and the overall initial success of your startup. You have to know your customer, know your company’s hard costs and know your competition. In short, market and competitive research. Weigh each data point and from there you can more accurately calculate the price your should initially offer.
Tim Nichols, ExactDrive
We adopt an approach of traditional research to understand where our product or services fit within the market. Then consider how your value approach is different vs the problem you solve. The basics of operating costs vs customers vs the ramp up period is critical to get right to avoid burning cash.
Robert Sturt,BT Business