Who Is Your Pricing Strategy For?
Pricing strategy is fairly straightforward, or so it seemed in Economics 101. You simply work out how much your product costs to provide, work out what the market will pay, move around your sliders on the supply and demand curves and optimise your price for maximum profit or market share.
Whilst plenty of students will be grappling with those concepts as they start university this week, they’re not necessarily terribly useful in today’s high-tech service economy. Pricing is a strange “science” and it can affect behaviour. Two Buck Chuck (now $2.49) will work just as well to get you drunk as Penfolds Grange or Grey Goose, a 1984 Renault 4 will get you across town as quickly as a 1984 Ferrari 288 GTO, yet the perceived values are very different.
Grove have a fascinating article on app pricing that’s well worth a read.
A lot of startups treat pricing as a math problem or, worse, an afterthought. Pricing is as much an art as it is a science, one that relies as much on marketing and psychology as it does on classical economics.
This Sequoia Guide covers strategies that can help you figure out the right price for your product—and end up with happier customers and more profit in the process.