How do you define your product pricing? 💸

Question

Setting a price on a new product is complex: too expensive, the potential customer will be tempted to switch to a competitor; too low, it will be harder to increase it over time.
How do you determine the price of a product you are about to launch? How do you adjust it over time?🤔

Valentin Haarscher · Accepted Answer

@benoit_chambon at Cycle we ran monetization interviews and followed the approach below :
• PHASE 0 - Initial research :
1. Benchmark and segment other tools in your sector or a sector adjacent to it (i.e. look for pricing models, pricing metrics, paywalls, number of plans, name of plans, etc.)
2. List best practices and inspiring examples that will help you shape your v0
• PHASE 1 - Value proposition definition and v0 of pricing :
1. Validate your high level feature set and value proposition available at launch (i.e. challenges identified, use cases tackled and things you’ll try to be extremely, surprisingly good at)
2. Prototype a low-fidelity home page summarising future value proposition (v0)  - we used Figma
3. Prototype a low-fidelity pricing page (v0) - we used Figma
• PHASE 2 - Customer interviews
1. Leverage your beta customers, team and investors’ network to run interviews with different types of potential future customers (i.e. try to have various team sizes, product maturity, funding stages, geographies, etc.)
2. Validate your buyer persona characteristics (i.e. current tool stack used, overall budget for tooling, buying process, latest tool subscribe to, current frustrations and needs)
3. Present your value proposition using your low-fidelity home page
4. Listen carefully to immediate feedback on value proposition
5. Identify most and least valuable aspects of the value proposition (MaxDiff approach)
6. Gather 3 price points : too expensive, getting expensive, bargain (Van Westendorp approach)
7. Present your low-fidelity pricing page and listen carefully to immediate feedback and reactions
• PHASE 3 - Conclusions & next steps
1. You can now refine your value proposition and pricing model (v1)
2. Rank the most and least valued aspects by persona (you might also want to tweak your sales/marketing pitch for existing features or adapt your product roadmap for upcoming ones)
3. Identify of an acceptable price range by persona (van Westendorp curves based on price points)

Bilal Chaglani · Answer

I would recommend you keep three things in mind when defining your product price - Competitors Pricing, Value generated by your product and last but not least is your Cost Price.

Figure these numbers out and play around in that range. Also try designing your price in a manner that you can increase as your client finds more value in your product. For instance we price our platform based on monthly active users.

Pieter Limburg · Answer

Don't make this too complicated.

Someone once asked me how he should price a notification system. I asked him, what's the problem you're solving? Turns out, this notification system prevents downtime for a rig generating $10k/day in profits ... if down, the customer is losing $10k per day and this was currently happening twice per month, costing $20k per month.

Sold for $5k per month, even though it was built in half a day.

Solve the problem, share the benefits.

Sonia · Answer

@benoit_chambon @valentin_haarscher This is awesome! Very helpful, thank you for sharing

Süheyla Şeker · Answer

Competitors and average market price are effective in our strategy. We have to consider our target customer group too

Devanand Premkumar · Answer

@benoit_chambon @valentin_haarscher Pretty detailed explanation including the steps and decision criteria. Thank you again :)

Maxim Frostman · Answer

Looking at the competitors and calculating unit economy helps a lot.

Tushar Gupta · Answer

@benoit_chambon @valentin_haarscher Treasure! Very helpful.

Nazim @Koinju · Answer

This is not about pricing, this is about loyalty to the service :-)

Shivam Ramphal · Answer

In our team we had to determine what we can offer; services, products, goals, or goals.  Then determine its monetary value in the current market. As well, having loyalty to your customers to stay with you as a customer.

Louis Bernard · Answer

1.Positioning of Product.
2.Competitors' Pricing Strategy.

Benoit Chambon · Answer

@valentin_haarscher WOW, nice explanation Valentin🤩

Achyuthan G R · Answer

@timz_flowers I might be trying out these steps

Step 1 => Extensively analyse the competitors product & their pricing model.
Step 2 => Go for the best priced product that allows me to use all their features. 
Step 3 => Will assume if I have implemented the same product pricing does it honours the service that I am rendering to our users by comparing it with the other products. 
Step 4 => If it does I start with a 5% or 10% lower pricing model. 
Step 5=> Will definitely work out the expenses & profit & calculate the break even points before finalising Step 4.

Doing an online survey & reaching out to people who are running similar SAAS models with the current pricing model will give a lot of insights to land up on the most suitable one.

Sam Bauer · Answer

this is one of our most important questions to solve within the next 4 months. if someone knows how to solve it for timz.flowers let me know

Valentin Haarscher · Answer

@benoit_chambon @sonia5 You're welcome Sonia !

How do you define your product pricing? 💸

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