Explore the World's Best Ideas
Join today and uncover 100+ curated journeys from 50+ topics. Unlock access to our mobile app with extensive features.
The hardest part of startups is making choices. Not decisions but choices. A choice is a decision between alternatives, whereby deciding to do one thing you are also deciding not to do another. Pricing strategy selection is a choice. Or at least it should be.
Compared to the other work you need to do on pricing, however, choosing a pricing strategy is actually pretty easy.
14
104 reads
Value metric: the unit of consumption by which your users get value.
Pricing metric: the unit of consumption that your buyers pay for.
14
58 reads
Grow: Setting a low price, leaving most of the value in the hands of your customers, shutting off margin from your competitors.
Skim: Initially setting a relatively high price to reinforce your value and capture the profit you need to invest in more innovation.
Follow: Setting price based on your largest competitor or a dominant input so that you track changing market conditions.
16
32 reads
The Follow strategy needs a bit more explanation. This used to mean finding a dominant competitor and setting prices at a premium or discount to their price (in practice usually the latter).
In some industries, there is a dominant input that has a big impact on value propositions.
In others, it is the interest rate—pricing strategies for solutions for financial services companies are very dependent on interest rates. The price that makes sense in a low-interest-rate environment can be very different from what works in a high-interest rate environment.
14
21 reads
15
22 reads
15
19 reads
Pricing strategy can change as you move across Geoffrey Moore’s technology adoption cycle (see B2B Pricing Black Magic). As you move from Early Adopters to Bowling Alley to Tornado you may want to change your pricing strategy at each phase.
Companies buy for different reasons at each phase and pricing strategy needs to reflect this. Innovators are looking at things because they are cool. They are not real buyers. They are important, as Early Adopters tend to follow innovators and are influenced by them.
15
21 reads
Early Adopters buy because the solution gives them a competitive advantage. They expect to pay a premium and are not persuaded by discounts. In the Bowling Alley, people are buying because their peers are buying. This is a critical phase as it is when the market gets framed and anchor prices are set. Be very careful about using a grow strategy here (low prices) as you can do long term damage.
14
17 reads
15
24 reads
IDEAS CURATED BY
"Yeah, I'm a thrill seeker, but crikey, education's the most important thing. " ~ Steve Irwin
Learn more about strategy with this collection
How to balance flexibility and structure in a hybrid team environment
Understanding the challenges of managing a hybrid team
How to maintain team cohesion
Related collections
Similar ideas
8 ideas
6 Different Pricing Strategies: Which Is Right for Your Business?
quickbooks.intuit.com
4 ideas
4 ideas
How to Win in Business With the Right Pricing Strategy
buzzedison.medium.com
Read & Learn
20x Faster
without
deepstash
with
deepstash
with
deepstash
Personalized microlearning
—
100+ Learning Journeys
—
Access to 200,000+ ideas
—
Access to the mobile app
—
Unlimited idea saving
—
—
Unlimited history
—
—
Unlimited listening to ideas
—
—
Downloading & offline access
—
—
Supercharge your mind with one idea per day
Enter your email and spend 1 minute every day to learn something new.
I agree to receive email updates