How Should I Price My Product?
So you’re building an amazing new product…it has a lot of value but the one thing you need to ask is, how much should you charge for it? Pricing a product or service can be challenging. After all, it’s how you’re going to be generating revenue. I’m an experienced entrepreneur and I’ve had to address this countless times for the businesses that I’ve been involved with setting up. Admittedly, I’ve gone to market with one price and subsequently changed the price based on the initial ‘beta’ test, feedback from customers, or other market insight. Maybe you might change the business model entirely and make it ‘free’ for users and generate revenue from sponsors, which is what I did with Wicked Start.
Consider the following 3 tips to help you price your product:
Analyze the market to see what similar or competitive products are going for. Are those competitors providing more or less service than you? See where your product falls and let it be your guide for your own pricing. If you’re providing more service or additional attributes, think about charging a higher price. Service is king! High end products exist despite the fact that there are comparable substitute products which are low-cost. There are thousands of examples - think about Dove skin-care products which are low cost relative to Clinique, which is high end. But, if you’re going high end, make sure that you have what it takes to service and appeal to high end customers.
Get feedback from your prospective customers before you launch or release your product. Don’t ask friends or family because they’ll generally tell you what you want to hear. Seriously make outreach to those you most likely think will purchase your product. Use Survey Monkey because they have a free version to ‘poll’ your audience. Tell them about your product or service, its purpose, and suggest some likely pricepoints. Ask your potential market about what they’d likely pay. When I was launching NuKitchen, we surveyed potential customers by asking them how much they’d spend on our service. Responses ranged from $20 to $40 for a day’s worth of healthy meals. We ultimately decided to charge $30/day.
Don’t go for being the low cost leader by charging too little for your product. This may be what you ultimately do but this is a dangerous and slippery slope since competitors can easily follow suit. Initially, you want to offer free trials or product samples. For example, when I launched NuKitchen, I used to man kiosks at Equinox fitness facilities where I would offer complimentary NuKitchen meals to gym members who finished their workouts. At first this seemed expensive but I realized that since people didn’t know who I was, they were less likely to pay the full retail price of $30 for a day’s worth of meals. By offering free samples, I was able to generate new signups which more than offset the cost of these sample meals.
We welcome your thoughts, so let us know what works for you!