At the August 14 Startup Product Talks SFBay meetup, Teresa Torres, VP Product at AfterCollege, discussed critical insights derived from cognitive reasoning and brain science research during her presentation on How To Make Better Product Decisions During the Q&A, there was a discussion around pricing issues.
Colin Whooten posted:
“Great conversation last night, thank you everyone! Here is an excellent article on pricing that I thought many would find interesting, it provides a high level summary of a lot of different surprising observations and links to where you can learn more.”
By Peep Laja
Asking people what they’d pay for and how much rarely works;
1. people will tell you what they WANT to pay—which is obviously much less than what your product or service is actually WORTH.
2. what people say and what people do are very different things.
3. people really don’t know how much things are worth or what’s a fair price
4. People have trouble comparing different options
5. In our minds, physical magnitude is related to numerical magnitude.
6. Nothing is cheap or expensive by itself, but compared to something.
1. What’s the best way to sell a $2000 wristwatch? Right next to a $12,000 watch.
2. Start throwing out high numbers. Add some very expensive products to the selection (that you don’t even intend to sell).
3. If the final price of your service / product is a result of negotiations, start high.
4. If you’re competing on price, state how much others are charging before revealing your price.
- Straightforward Pricing Ash Maurya in My Experiments in Lean Pricing back in Feb, 2010
- Pay What You Wish Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability
- Offering 3 Options Priceless: The Myth of Fair Value (and How to Take Advantage of It)
- Neil Davidson’s ebook on software pricing Don’t Just Roll The Dice
If you want to charge more than the market average, look at the competition: how they package their offering; what’s the user experience like, and change that.
If you look like a new category, people are more likely to pay up.
On the other hand, if you can profitably sell something much cheaper than the other guys, great. Use their pricing as the reference point and you’ll win.
Consider more than price
About The Author
Peep Laja is an entrepreneur and conversion optimization expert. He’s been doing digital marketing for 10+ years in Europe, Middle East, Central America and the US. He has extensive experience across verticals: in the past he’s run a software company in Europe, an SEO agency in Panama, real estate portal in Dubai and worked for an international non-profit. Today he runs a conversion optimization agency Markitekt.
See on conversionxl.com
Nobody wants to pay more. They don’t want to feel “ripped off”. They want to feel special, like they received a good deal. However, it is in a firm’s best interest to charge different customers d…
- Charge different customers different prices based on how much they are Willing To Pay (WTP)
- Customers see price segmentation all of the time and have come to accept it.
- You don’t need to actually justify your price segmentation, but your customers need to able to justify it in their minds.
See on pragmaticpricing.com