Pricing Strategies

Steve Ballmer believes pricing is important (watch from 5:00 to 12:00, pricing from 08:00 to 09:00) the rest is educational too.

So pricing is important. It's also complicated and entrepreneurs are not good at pricing strategies, they are either too greedy and alienate customers from them but more commonly they are afraid to alienate their customers from them and ask to little for their product or service.

Ways to calculatie price from an cost or value perspective

  • Price based on cost
    • Calculate cost price for your product, add required margin and you have "cost plus pricing" 
  • Price based on value
    • What is the product or service worth to your customer, what problem does it solve and what are the costs for your customer is the problem isn't solved.

Ways to calculate price from a marketing perspective

  • Premium Pricing
    • Set your price as high as you can to generate margin
  • Economy pricing
    • Set your price as low as you can to generate volume
  • Bundle pricing
    • Try to sell as much as you can in one deal
  • Tiered pricing
    • If you buy more you pay less

Market Entry Pricing

  • Penetration Pricing
    • Set price in such a wat as to achieve maximum market penetration (suicide pricing)
  • Skimming
    • Go for the highest paying customers
  • Competitive Pricing
    • Base your price on what competitors are doing