Pricing Framework

  Your pricing framework should be based on value rather than based on the costs of producing or manufacturing your product or service. Using your Quantified Value Proposition, determine how much value you create for your customer. Then, charge your customer some fraction of the value that has been created by your product or service. Generally, charging about 20% of the value created is a good strategy, leaving 80% of the value created for the customer. This gives you room to make money while keeping your product very attractive to potential customers. Setting your Pricing Framework based on value created requires that you price accordingly to the amount of risk that your business model places on your customer. For example, a Subscription based model can charge more, because the customer has the opportunity to opt out, than an Up-Front Fee business model. • Use your DMU to help make Pricing Point decisions. For example, if your Primary Economic Buyer has a budget of $10,000 then pricing your product at $11,000 may significantly decrease your sales. • Understand how your competitors are pricing their products . If you can out-price your competitor based on the extra value that your product adds while maintaining benefits that are otherwise similar to your competitors, your business stands to gain from more customers. • Acknowledge that different customers will pay different prices. o Technological enthusiasts: Buy fewer products but price insensitive o Early adopters: Fairly insensitive to price but like to feel like they get a deal for new tech o The early majority: The common price point that will capture a majority of your customers o Late majority, Laggards, and Skeptics: Require more conservative pricing • Allow for flexibility with Early Testers and people who might champion your product to others. Incentivize these customers with trial periods or established discounts. However, be careful not to discount ongoing revenue streams as this sets a bad precedent for the value of your product. • Remember that it is easier to lower your price than to raise it. Price high and offer initial discounts rather than pricing to low and having to ultimately raise the price. Deliverable (upload a word document or pdf) Describe the value your product/service brings to the customer. Quantify that value. (Put a dollar figure to the value added) Establish a range of price points? _____________ High Price _____________ Middle Price _____________ Low Price