Product pricing can help your company achieve profitability, support product positioning, and complement your marketing mix.
Once your startup is ready to commercialize its product, you must determine how much to charge customers to purchase the product. In other words, it is time to establish the pricing structure.
Pricing is one of the four main elements of the marketing mix. Pricing is the only revenue-generating element in the marketing mix (the other three elements are cost centres—that is, they add to a company’s cost). Pricing is strongly linked to the business model.
The business model is a conceptual representation of the company’s revenue streams. Any significant changes in the price will affect the viability of a particular business model.
A well-chosen price should accomplish three goals:
There are different methods of determining the price for high-tech products.
Value-based pricing attempts to establish the return generated by the product’s use from the customer’s point of view. How a customer perceives product value, and the actual value the customer receives, can be estimated by identifying:
Setting a price in the Early Market involves some guesswork as the product’s value is unproven at this stage. To guide your pricing decisions, determine the:
To cross the Chasm and enter the Bowling Alley, pricing must be based on value. To guide your pricing decisions, determine the:
Finally, keep your pricing model simple to communicate and ensure it makes sense to the customer. If it does not, your sales staff will struggle in the face of other competition.
Wiefels, P. (2002). The Chasm Companion. New York: Harper Business.
Viardot, E. (2004). Successful Marketing Strategy for High-Tech Firms. Boston: Artech House.