For fellow hardware entrepreneurs, how do you determine your pricing? I 100% understand margin, so I more mean how do you determine willingness to pay? I see a lot of hardware startups don’t charge enough, and it hard to raise after it’s set. That said, if you later drop your price sometimes it’s seen as desperate. Unlike software, you can’t easily A/B test your pricing and change it for different customers. Would love to hear strategies/models.
Why can't you do "A/B" Testing? Label it differently, go to a couple of different events that are disparate and price it differently... add some "incremental features" over the base price and see what that gets you.
The other way to do this is to do "value based" pricing - IE what actual value do you add? So lets say you have a device that is 10% more effective than your competitors you can set your price 5% higher than your competition and position yourself as still giving thema 5% benefit
you position it 10% less than your competition and you give your customer a 20% benefit.
and if you aren't creating value - then are probably wasting your time.
Where it gets really hard is if you are disruptive and don't have lot of competition.and the hardest I'd say is the product that like the NEST primarily gets its value from Social Cachet rather than actual functionality
but as Phiilp said - its a bit of an art
note also that 100% margin also needs to include ALL of the future intangibles of COGS - marketing, sales, discounts, re-engineering, lawsuits IP defense etc.