Strategic Price Setting

Set and forget is not a pricing strategy ! Price--> Design--> Build We know that's what everyone says, but thats an oversimplification of what the entire process should look like. The assumption your pricing was correct in the pre-design phase and doesn't need change is dangerous, dangerous, dangerous !! I have seen too many physical and software products change drastically between initial design to final delivery. Product owners will typically assume that pricing still holds. You have to change that philosophy. In the real world we need a lot more iteration in price: Step 1: Initial Price: This stage you quantify the value and set an initial target price. This is a combination of internal/external research, some value quantification and pricing knowledge. Step 2: Design: With that price info, the product team designs a product that hits product and profitability targets. This is also where you need to keep track of the product margins. Often product will go design a better product at the expense of higher cost, and margins suffer before launch. Step 3: Reprice: Now that we know the new design constraints that impact the profitability, this stage gives you the opportunity to reprice the product based on the design. If substantial value has been added, price should go up. Do not fall into the 'lets over deliver on value and keep price same' trap. Step 4: Build: Now with that new price info and product roadmap the product goes through the build stage. Step 5: Pre launch reprice : Now significant time may have passed since last price review. The market for the product, the economy etc may have changed. This stage can assist in making last changes before product goes out. Good time to also establish guardrails for price performance, discount strategy, or sales strategy. Step 6: Launch: Goes without saying the product is out in the real world. Great way to capture feedback. Also a stage where performance is measured against the price guardrails. Step 7: Reprice 3: Based on sales feedback, you start charting next steps. Selling too slow, you may need discount or reprice. Selling too fast, it may be overdelivering on price vs value. Pricing metric may need change. Fx may have changed. This is the price adjustment stage, should be annual or semi annual. You can incorporate these steps into new product introduction framework or annual or semi annual pricing strategy process, either ways it will help establish good pricing principles in the org. I know of many products that once designed were never repriced years into its life.. Surely things must have changed all those years... Think of Pricing as a lifecycle !! -------------------------- We are in #Pricingtribe.

Brands throw darts at pricing blindfolded when they could use laser precision. This framework eliminates the guesswork (and it’s the exact framework we use for our clients): Step 1: Define Your Objective Get specific before you test anything: • Understanding fair pricing perception? • Measuring brand awareness impact on price sensitivity? • Finding gaps in the current pricing structure? Step 2: Use the Right Methodology • Survey your audience using tools like Pollfish • Split respondents: brand-aware vs brand-unaware • Ask Van Westendorp questions: → What price feels "too expensive"? → What price feels "too inexpensive"? → What price is a "bargain"? Step 3: Analyze Audience Segments These groups live in different worlds: Brand-Aware Customers: • Higher price tolerance • Accept broader price ranges Brand-Unaware Customers: • Prefer entry-level pricing • Need more education and trust-building Step 4: Identify the Optimal Price Range • Plot responses on Van Westendorp Price Sensitivity Meter • Find the Indifference Price Point (IPP)—where price feels "just right." Real example: • Brand-Aware IPP: $65 • Brand-Unaware IPP: $47 • Optimal range: $45–$75 That $18 difference changes everything, which is why you need to stop guessing and start measuring. What's your current pricing based on? If it's a gut feeling instead of data, you're leaving money on the table.

You're afraid to raise your prices because you think you'll lose clients. Here's the counterintuitive truth: You might lose some clients, and that's actually strategic. I worked with a professional speaker who raised her minimum speaking fee. She lost 25% of her revenue initially. But here's what happened next. That same price increase saved her 40% of her time by eliminating lower-paying engagements below her new threshold. What did she do with those reclaimed hours? She wrote a book proposal. She developed a signature workshop series. She built relationships with higher-tier event planners. Within 18 months, her revenue was 30% higher than before the price increase. The best clients who truly value your work will stick with you. The ones who leave either can't afford your current level of expertise or weren't aligned with where you're heading anyway. Here's the practical strategy that makes this work: Give existing clients 6-12 months advance notice of your price increase. Grandfather them in at current rates until that date. Why this timeline works: Six months gives them enough time to budget for the change without feeling blindsided. It preserves your current relationship while you're building new work. And it positions the increase as inevitable growth, not a sudden cash grab. The real insight? This isn't just about raising prices. It's about strategically choosing which clients you keep as you level up your business. 🛟 Save this post if you're ready to get paid what you're actually worth. ➡️ Follow Dorie Clark for more strategies on building a business that values your expertise.

We reached $4M ARR, then cut pricing ~40% to prioritize retention over short term revenue. Pricing can separate a nice $5M biz and a breakout. If launching a product, here's the tactical way to set pricing, based on your goals: 1. Recognize that pricing strategy is VERY different depending on if you're VC backed or bootstrapped. VC backed can undercut competitors with subsidized low pricing, grab market share, then increase prices over time (see: Uber, Doordash). Bootstrapped companies have no such luxury: they need to make a profit on every customer from day 1 - you need the cash, yesterday. *this post focuses on finding right pricing in a bootstrapped environment* 2. First, figure out the lowest possible price you can breakeven at. Consider all costs involved from bringing on and servicing a customer - from sales and AM, to variable product costs. This is now your absolute minimum pricing. 3. Take 50 calls, get 10 customers, as fast as you can, at whatever cost you can, (above min. pricing). Your first 10 customers aren't about making money, they are about gathering data. Every call is an opportunity to triangulate what people are willing to pay. Try min. pricing, try 3x min. pricing. Try 2x min. pricing for month to month, but say that you can drop that by 30% for 3 month commit. Keep pushing up price until people tell you that is ridiculous. Triangulate towards a price people will pay. 4. Classify these calls by customer type. One type of business might think pricing is ridiculous, whereas another finds it cheap. Make sure you are not letting all of this data get mixed in together. Half of pricing discovery is figuring out who your core customer is. 5. Sign 3 month deals, not annuals (to start). Eventually, you want annuals. But at first, annuals are dangerous. You're looking for data on retention, and locking someone into an annual prevents you from gathering that data. Signing 3 month deals forces the conversation earlier.... are people getting value for the price? 6. Revise. Assuming you care about retention, take note of who is staying on. Be honest that you're trying to find a price that works for them. People like honesty and this will get you more information then beating around the bush. Ask "what pricing would make this a no brainer to commit for the next year?" 7. Get real about what you are prioritizing - short term revenue, or long term retention? There is no singular right answer to this. So many factors come in to play: your end game, how big your market is, how easy/hard it is to attract new customers, and much more. But understand that price/margin and customer retention are opposing forces. Be intentional about what you are prioritizing for. (note: this can change at different times in company lifecycle). In short: - Take 50 calls, throw out wildly diverse pricing to gather feedback - Sign 3 month deals to rapidly understand value to price/retention - Be intentional about what your pricing will drive (margin v NDR)

𝗛𝗼𝘄 𝘁𝗼 𝗱𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲 𝗣𝗿𝗼𝗱𝘂𝗰𝘁 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 (𝗪𝗶𝘁𝗵𝗼𝘂𝘁 𝘁𝗵𝗲 𝗴𝘂𝗲𝘀𝘀𝘄𝗼𝗿𝗸) When it comes to deciding product’s pricing strategies, most of the PMs have 2 approaches: → Guessing work → Get overwhelmed by over 25 pricing strategies available in the market It makes the hard thing (pricing) even harder to decide and execute. But let me share a simple 3 step framework that would work for almost all the product pricing strategies. 1. 𝗖𝗼𝗹𝗹𝗲𝗰𝘁 𝗮𝗻𝗱 𝗮𝗻𝗮𝗹𝘆𝘇𝗲 𝗱𝗮𝘁𝗮 - The first step is to dive into the data. - Study competitor pricing, identify key profit margins, and identify customer segments that are most profitable for you at the current stage. - Look for insights that reveal how your product is perceived in the market. 👉 For instance, when Swiggy ventured into subscription models, it experimented with its Swiggy Super plan. By analyzing customer data, it found that users preferred free delivery perks. This insight allowed them to create a pricing model that not only increased subscriptions but also improved overall order volumes. ✅ So, pricing should always be a dynamic process. Don’t rely on a “set and forget” approach. Continuously engage with your pricing team and adjust based on market shifts and customer behavior. 2. 𝗙𝗼𝗰𝘂𝘀 𝗼𝗻 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝘃𝗮𝗹𝘂𝗲 - Don’t focus solely on maximizing profits or sales volumes, think about the value your product delivers. Consumers today are willing to pay a premium for products they feel add significant value. 👉 Consider Tata Nexon EV, one of India's leading electric vehicles. Despite higher upfront costs compared to traditional fuel cars, it offers long-term savings and environmental benefits, which customers perceive as valuable and they are buying it. ✅ As a product manager, your job is to understand what drives consumer decision-making. Are they paying for premium features, better service, or convenience? The more you emphasize value, the stronger your pricing strategy will be. 3. 𝗗𝗲𝘃𝗲𝗹𝗼𝗽 𝗼𝗽𝘁𝗶𝗼𝗻𝗮𝗹 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗺𝗼𝗱𝗲𝗹𝘀 - Once you understand your costs and customer segments, develop three pricing strategies - conservative, aggressive, and a middle ground. - Think of it as a Goldilocks approach: one option may be too extreme, another too safe, but the third might hit the sweet spot. - This gives your business a range of options to test and optimize. 👉 Take Netflix India as an example. When it introduced the low-cost mobile-only plan, it allowed the company to penetrate deeper into the price-sensitive Indian market. By offering different pricing tiers, Netflix was able to serve both premium and budget-conscious users. 𝗜𝗻 𝗮 𝗻𝘂𝘁𝘀𝗵𝗲𝗹𝗹: Pricing is all about understanding what your customers are willing to invest in terms of time, energy, and money. What's your go-to strategy for product pricing?

Most startups play defense when discussing pricing with customers. They dance between asking for too little, leaving money on the table, and asking for too much, only to lose the customer’s interest. The very best companies lead their customers in that dance. They use pricing as an offensive tool to reinforce their product’s value and underscore the company’s core marketing message. For many founding teams, pricing is one of the most difficult and complex decisions for the business. Startups operate in newer markets where pricing standards haven’t been set. In addition, these new markets evolve very quickly, and consequently, so must pricing. But throughout this turmoil, startups must adopt a process to craft a good pricing strategy, and re-evaluate prices periodically, at least once per year. The Three Core Pricing Strategies There are only three pricing strategies startups should pursue: Maximization, Penetration and Skimming. They prioritize revenue growth, market share and profit maximization differently. Maximization (Revenue Growth) - maximize revenue growth in the short term. Startups should pursue maximization when there are no clear differences in customer segments’ willingness to pay, and when the optimal short term and long term prices are equal. Many mid-market software companies price with the goal of revenue maximization, negotiating for the highest possible price in each sale. Penetration (Market Share) - price the product at a low price to win dominant market share. A bottoms-up strategy lends itself to penetration pricing. Price low to minimize adoption friction, grow quickly, and then move up-market after developing broad adoption. Penetration pricing leads to land-and-expand sales tactics. Expensify, Netsuite, New Relic, Slack follow this model. Penetration prioritizes market share. Skimming (Profit Maximization) - start with a high price and systematically broaden the product offering to address more of the customer base at lower prices. Skimming is widespread in consumer hardware. Apple sells the latest iPhones at the highest prices, and repackages older models at lower prices to address different customer segments. As Madhavan Ramanujam tells it, Steve Jobs was both a product genius and pricing genius. By pairing the two skills, he led Apple to record-breaking profits quarter after quarter. Skimming is less common in the software world because few startups develop a product at launch that will be accepted by the most sophisticated customers (and those willing to pay prices that generate the greatest margin). There are exceptions: Oracle’s database, Tanium’s security product, Workday’s human capital management software. Read the full post here : https://lnkd.in/g-mxQiV9

Most pricing strategies quietly erode your margins... Not every founder says they want to level up. But if they do, only a few have pricing models that allow them to do so. In the last 5 years, I’ve reviewed dozens of businesses and agencies. Most were stuck at the exact same breaking point: → Profit margins in the minus or stuck at 10-15% (despite higher workload) → Team either fully at capacity or not sure what to focus on next → Founders overwhelmed by a never-ending task list All because their pricing hasn’t evolved with them... Here’s the pattern I see most often: - Prices were set early: based on emotion or competition - Offers evolved and word of mouth gets new clients - Projects weren't analyzed & costs not tracked. But somehow it feels like being stuck: more work, same profit, no space to breathe. Actually, turns out: it's all an illusion of growth... So to get out of this: Price your services like you’re designing a system, not just putting a number on an offer or in an email. Meaning: → Your minimum viable price must reflect burn, runway, and team delivery load → Your forecasting must anticipate cash flow dips & seasonal fluctuations → Your pricing tiers must account for client size & value creation Also: If your pricing isn’t forcing out some clients&projects, it's not doing its job. The best pricing excludes as much as it invites. Run your current pricing through this: If a client says yes today: Will it actually support my cashflow, team, and energy 3 months from now? If the answer isn’t a clear yes, I hate to break it to you: Your model needs changing.