Turn your startup’s pricing strategy into a powerful growth lever

- Advertisement -

- Advertisement -

Pricing models can be powerful levers of growth. A bad pricing model will hinder growth and may even kill an otherwise promising startup, while a good pricing model will lock in some of the value a product creates as revenue and keep the growth wheels going.

- Advertisement -

A startup’s growth could be jeopardized if it revisits its model too slowly, especially in times of rapidly changing consumer behavior and inflation.

Developing or revising a pricing model is a complex, multifaceted task. Price is the most obvious element, but there are many others. Doing it right requires information from many perspectives: product, operations, finance, and sales, just to name a few.

- Advertisement -

Here’s a closer look at the questions we’re asking to start laying the groundwork for a pricing strategy.

5 key questions within our pricing strategy

Before we start working with startups, it is helpful to understand where they are and where they are going. Pricing models must consider considerations from at least two different perspectives.

Stakeholder perspective:

  • Who are the stakeholders that create (or provide) value?
  • What value is being created?
  • What are their alternatives?

Pricing models that scale with cost tend to provide more value in terms of revenue and margin.

Business Outlook:

  • How much does customer service cost?
  • How does price affect growth cycles?

Paying clients want their problems resolved quickly and reliably at the best price. Companies want to sell their products or services to as many customers as possible at the highest markup possible. These two perspectives are inherently opposite, and the challenge for founders is to strike a balance and create a pricing model that balances the needs of the business and its stakeholders.

The first step to building a pricing model is to collect research results and organize them in a format that can be used to evaluate trade-offs. We encourage founders to create a product journey map that will help them summarize the perspectives of both stakeholders and the company in the context of a competitive environment.

The world is changing fast for early stage startups. Even for startups that have already brought their product to market, it is recommended to periodically review pricing models in light of new products and features or after changes in the competitive landscape.

What to Do Before Creating or Revising a Pricing Model

When founders try to roll out a new pricing model, they face many difficult questions:

  • How can innovative companies rate their products in an entirely new category?
  • How can companies be sure that optimizing one side of their market will not negatively impact the other?
  • How do you create a pricing model that increases prices in proportion to the buyer’s willingness to pay without looking parasitic?

These and other questions can be answered by assessing willingness to pay against three key benchmarks:

Credit: techcrunch.com /

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox