Pricing strategy

Is there a formula to setting the price of a new product or service?

Calvin C.S.C.S Health and Wellness Educator

August 30th, 2016

When trying to determine the correct starting price for a product or service is their a standard formula.  Or does the dartboard method work best?   

Neil Gordon Board Member, Corporate Finance Advisor and Strategy Consultant

August 30th, 2016

Irwin's on the right track.

Overall, I suggest what you want it not the highest price the market will bear, but the optimum price, i.e., one that gives you the best long term benefit. Sometimes, that's a premium to the competition, e.g., where you have a superior product. Other times, it's a discount to the competition, e.g., where you have a competitive cost advantage. Some companies introduce high, snag the first adopters, then lower prices as volumes increase and costs come down, gaining market share along the way.

Competitive analysis, focus groups, and the like might help, as would someone with significant marketing expertise in your specific category.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

August 30th, 2016

The dartboard rarely works. The best answer is usually what the market will bear. How much can likely customers pay? What does the competition charge? How does your advertising position you in the market? There are formulas if you are a re-seller that vary product to product and industry to industry. If it is a service, pricing can increase with advertising and showmanship and decrease with "we will do it better for less". , 

Sam McAfee Building better technology leaders and teams

August 30th, 2016

I'd recommend looking at value based pricing which overlaps with Irwin's suggestions.


August 31st, 2016

dear Calvin 

You have to keep in mind 3 ideas:

- make profit
- make customers accept your product or service
- keep your part of market against the increasing concurrency 


Shel Horowitz I help organizations thrive by building social transformation into your products, your services, and your marketing

August 31st, 2016

One of my big questions in this area is how to price appropriately for widely different markets. e.g., how do I offer similar services to struggling solopreneurs scared off by a low-four-figure price quote and top corporations who would assume anything less than 50K isn't worth anything?

Would welcome insights on this!

Paul Garcia marketing exec & business advisor

August 31st, 2016

Way to hijack the topic Shel. *smile* Actually your question deserves its own thread, please post it.

Otherwise Neil is right that perceived value is the best way to price the product/service. While you may find a larger group of prospects willing to consider your product when it's in the middle of the price range for similar products, it really doesn't matter if you're expensive or inexpensive if you provide the right answer for the right problem.

By "right" I mean delivers a solution at a cost that makes sense because it saves a specific amount of time, effort, hassle, etc.

As far as what the market will bear, it's up to you to justify your price (somewhat to Shel's point). If it's clear why your product costs something because it improves and lowers the expense of how things were done before, you have a reasonable place to price built in.

Remember that you can always lower the price after a product is introduced, but it's VERY difficult to raise it. Publicly visible adoption discounts to gain market share create resentment. That means that your customers who buy during a discounted launch will never believe that your product is worth full price, because if it were, you wouldn't have been able to discount it.

Encourage and incentivize the behavior you want. Offering incentives for volume, for referrals, for long-term commitments or subscriptions, and such don't devalue your product the way that coupons and sales do.

Ask some people who would be interested in your product how much they think it should cost and why they think so. It can only help you to get firsthand information.

Jonathan Nehrer Medical Diretor & Telepsychiatrist, EMR & telepsych will change Psychiatry in the next 10 years

September 6th, 2016

If you can afford it the best answer is a big data crunching company to tell you what the market will bear. This would be like what what airlines and hotels use to set their rates and the rates are always changing