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
The Follow Strategy
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.
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Pricing is a Critical Choice
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 ...
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The Three Pricing Strategies
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 innovat...
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Pricing Strategies for Startups
- Adopt a grow pricing strategy when market share (first mover advantage) is the most important thing about your market. Keep in mind you will need to raise a lot of money to win.
- Adopt a skim or premium strategy when you have a compelling value differentiation and have identified a we...
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Constraints on Pricing Strategy
- Your price makes a statement about your brand. You cannot claim a premium brand and pursue a grow pricing strategy. And a discount brand cannot pursue a skimming strategy.
- Market Following strategies are the most difficult to execute. You have to be in close touch with the market, be...
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The Evolution of Your Pricing Strategy
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 ...
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Pricing Strategy Checklist
- I have aligned pricing goals with the overall strategy.
- I have a focused target segment.
- I understand what factors determine profit and loss in my target segment.
- I understand the pricing metrics used by the alternatives (competitors or other options customers have).
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Early Adoptors
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 ...
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Setting The Price: Three Steps
- Set goals and make sure the pricing goals align with the larger business strategy.
- Understand how you create value for different market segments (consider economic, emotional and community value).
- Figure out your value metric and find a pricing metric that tracks the value.
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