If you are trying to get a sense of what price to set for a product or service, there are three questions that will help you make a more informed decision:
- How much do you think this product or service costs?
- What would you being willing to pay for this product or service?
- What is the most you would be willing to pay for this product or service?
Different customers will answer this differently. In fact, there may be customer segments that value the product or service differently or who have the ability to pay more or less for the product or service than other customers.
In pricing a product or service, you must always consider your costs and the value of the product or service to the customer. Generally, unless you are pursuing a “loss leader” or a razor-razorblade pricing strategy, you must price your product or service somewhere between the cost and value assuming the cost is less than the value.
You could explore and influence reference prices, that is, other prices that inform perceptions of your product’s or service’s price. You could create a price segmentation scheme, that is charging different prices for different customer segments, to maximize revenues and profits. And, if you are just entering a market with your product or service, you could pursue a penetration or skimming pricing strategy depending on what you are trying to accomplish.
There are many other considerations when pricing a product including price elasticity/sensitivity, price thresholds, bundling/unbundling, sales terms, payment methods, subscription model versus outright purchase, etc.
Having considered some of the other components of pricing strategy, these are still the most important customer questions to inform your pricing strategy:
- How much do you think this product or service costs?
- What would you being willing to pay for this product or service?
- What is the most you would be willing to pay for this product or service?
Make sure to ask these questions before you set your price.