Activity
The challenge for this activity is to develop some pricing hypotheses.
To do this, you’ll need to take into account the following considerations:
- What are the comparables? (eg. competitors, substitutes and alternatives)
- What are the norms? (eg. what a customer expects to pay)
- What is the customer’s willingness to pay?
- What revenue streams are possible?
- What are the costs to produce the product?
- What are the costs to acquire a customer?
You will not have all the answers to these questions at this point.
There are a number of variables to consider, many of which are subjective and strategic.
The objective here is to come up with a hypothesis that you can then test.
Resources
- Pricing and Avoid this Common Startup Pricing Mistake, some thoughts from Steve Blank on pricing
- Pricing Your Product, by Sequoia Capital
For more information on considerations around pricing, here is a 4-part pricing video series from Paul to help you get up to speed on this challenging topic:
Part 1: Pricing Sensitivity
Part 2: Skimming and Penetration Approaches
Part 3: Tiered, Dynamic and Pricing Discrimination
Part 4: Strategies for Effective Pricing Changes.
References
Blank, S. [Udacity]. (2012, October 18). Pricing – How to Build a Startup [Video File]. Retrieved from https://www.youtube.com/watch?v=aNcoLu-nQuY
Blank, S. (n.d.). Avoid this Common Startup Pricing Mistake [Video File]. Retrieved from https://www.inc.com/steve-blank/avoid-this-common-startup-pricing-mistake.html
Pricing Your Product. (n.d.). Retrieved from https://www.sequoiacap.com/article/pricing-your-product/
