One of the most common questions I get from startups is how to figure out how much to charge for their product or service. My latest article at American Express OPEN Forum, Factors to Consider in Your Pricing Strategy, provides the strategic context for figuring out your pricing:
How did you decide how much to charge for your product or service? Did you base it on the competition? Some margin above your cost? Or did you throw a few numbers in a hat and pick one? A crystal ball, perhaps?
I’ve seen many companies that didn’t seem to give their pricing much more thought than that. Outside of a few industries, such as retail and energy, in which pricing is heavily studied and practices are well-established, pricing is often an afterthought, based on only one main factor plus some gut feeling, rather than the many factors that should be considered. The price of your product is more than just a number you plug in to your forecasting spreadsheet. It’s an essential part of your marketing strategy.
Retweeets and comments (there, please) much appreciated, as always.