How to Price Your Product or Service so It Sells BIG!
Liz Conzo-Kershner, Senior Director of Strategy, Insights, & Advanced Analytics at Delta Faucet, is a seasoned expert when it comes to establishing the right price for a new product. The ability to collect and analyze data science and market economics are the keys to determining how much you should charge for a product or service.
From using the Cost-Based Pricing strategy to understanding your customer’s value drivers, determining the correct price requires research, exploration, an open mind, and patience. Liz broke down all the steps of this process, and gave helpful tips and advice for finding the strategy that works best for a particular product or service. See the full photo album from the event here!
Liz will be back soon to lead another Startup Study Hall - this one focused on customer behavior. More info on that coming soon! Until then, here are some key takeaways from Startup Study Hall on April 5:
1 - The three most common strategies for pricing a product or service are Cost-Based Pricing, Competition-Based Pricing, and Value-Based Pricing. Liz recommends triangulating all 3 strategies to find your “perfect” price point.
2 - Cost-Based Pricing (Cost-Plus Pricing) takes the total cost of a product PLUS a fixed percentage markup (margin) to calculate a price per unit.
3 - Competition-Based Pricing considers your competitors' pricing AND your desired position in the market. Who is your niche market? How does your product compare to competitors? Is your target customer looking for a higher quality product or a more basic, less expensive one?
4 - Value-Based Pricing is based on your target consumer’s perceived value of a product or service plus the value of solving a specific problem for them.
5 - Three factors that trigger a purchase: hygiene factor (the need this product/service solves); preference drivers (customer's likes and dislikes); and value drivers (factors that compel a customer to pay more for a product/service.)
6 - Once you get within a ballpark range, common strategies for hone your price are Charm Pricing, Price Anchoring, and Decoy Pricing. Liz recommends using these techniques to refine your pricing, not to set your pricing.
7 - Charm Pricing uses prices ending in a 9, and signifies “a good deal” to your customers. (This technique should not be used for luxury or recreational goods, which tend to end in 0.)
8 - Price Anchoring uses one price to anchor a consumer's cost expectations before showing other options. This technique works best with a tiered pricing model, with the first option shown being the target price.
9 - Decoy Pricing is used upsell a more expensive option. This works best with a product that the consumer is already educated about, like the movie popcorn example. Which popcorn is the decoy?
10 - If you can't pinpoint your number, go with the higher price. Just like stairs, it’s easier to go down than to come up!
Ready for more support for Scaling your Startup? Join us for on April 19 with Jantina Anderson, Associate Director of HR at Carrier Corporation. Jantina will demystify the transition from using contractors and interns to hiring full-time employees, and lay the groundwork for a successful process. We hope to see you there!
➡️ REGISTER HERE: https://bit.ly/ssh-jantina-anderson
