Setting a Price
Pricing is hard. You can have the most unique product and amazing marketing plan but at the end of the day customers will judge you by the price they pay. So how do you get it right? Famously, when the iPhone launched, many would say “This is crazy! I would never pay $500 for a phone!”, and yet here we are. Join Jonas and Christian in the discussion, and hopefully we can provide useful pointers for you!
As ever, send us feedback as well as topics you’d like to hear about in the future.
#productleadership #productmanagement #pricing
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If you have an IT product, technical product, you know, places like Gartner Research, other areas, there's plenty of knowledge hubs that kind of gives you a good understanding of your competitive space. Awesome. And that's an interesting point to segue into the price points and how people perceive them is also one of the issues you'll face when you select yours.
And so one thing to mention from my side would be that you can't make everyone happy and some people would like it super cheap, some people are happy to pay more. The reality is once you do set a price point, whether, you know, and thanks for mentioning B2C and B2B, once you do set price points, you do automatically aim for certain audiences and so you will focus your efforts and you will focus your product towards certain audiences that are willing to pay a certain price. So you can go premium, you can go cheap, you know, high volume, but low margins.
Whatever the price points are that you choose, you will automatically do, you know, certain focuses. And so in order not to stay theoretical only about this, the biggest thing I would recommend with pricing is in addition to the research, as you mentioned, as in, you know, see what's out there on the market and what people think about it. The biggest other thing would be to experiment with your own price points and you could do things from research, as in surveys, try to ask people.
As a startup, I even interviewed people in coffee shops in order to find out price points or, you know, go more professional with B2B companies and talk to them. What you could also do, a good trick that I found over time is instead of asking people a range of prices or, you know, would you be happy to, but in order to really find out and to emulate the moment that somebody has to give you their credit cards or really find out if they give you the money, what you can do is segment your audience into several groups of people and tell one group, you know, it will cost you 20, please give me your credit card number so you can sign up for the first of the next month. The next group, you say it will cost you 40.
The next group you say it would cost you 60 and see where people stop paying you, where they stop wanting to give you money. And you'll see the inflection point of where your prices are, for example. That's a very, you know, basic and cheap method, but it still works.
It's true. And it carries an important point, but it's to, you know, you can go full academic on researching what's the most appropriate price point you should pursue. But at the end of the day, the most valuable feedback you get, like with anything in product discovery is talking to customers, talk to the end user, sign up end users to your dilemma, you know, give them a discount with the first five customers, but have very transparent conversations with them around what's the most appropriate price point.
Most customers B2C or B2B like that. They first of all, like the discount, but they also like being part of an innovation process and bringing new products to market, right? You know, the best research you can do is to talk to customers and get that feedback. The last thing is around how you present your price point and a tangible and very efficient way of also experimenting with different price points is to do a price tiering.
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