I’m always interested in how companies price their products and services. A long time ago, Matt Plociak my partner and I at our systems integration company Netlan, used to throw spaghetti against the wall to come up with pricing for our products and services. Well not really, but it was indeed always a challenge to figure out what was the best price to sell, and sometimes when we got no resistance, we thought we were pricing our products and services too low!
So, when I saw this headline Our 6 Must Reads On Pricing a Product from First Round Review I was definitely intrigued to read further.
The article relates the story about Johnny Carson who interviewed the legendary salesperson Zig Ziglar.
“They say you’re the world’s greatest salesman,” said Carson. “How about you sell me something — say this ashtray?”
“Before I can do that,” replied Ziglar, looking at the ashtray. “I’d have to know why you want it.” “I guess it’s well-made, it looks pretty nice, and it’s a good ashtray,” replied the talk show host.
“Alright,” responded Ziglar, “but you’ll have to tell me what you think it’s worth to you.” “I don’t know,” thought Carson, “I guess $20 would be about right.”
“Sold!” Ziglar exclaimed, smiling.
As a long time student of sales, this exchange really goes to the heart of selling a product or service – what is it worth to the buyer, and what is it worth it to the seller to sell at that price!
The folks at the Review dove into their pool of great people resources and asked them to discuss the six most impactful actions a startup can take to get their pricing right.
Here they are:
- Nail price before product. Period.
- Weave in price sensitivity into your feature preference surveys.
- Map how your product’s price correlates to a marketing- or sales-intensive strategy.
- Know how your product’s price impacts how and what you ship.
- Be selective about incentives and discounts.
- Design A/B tests on price with international users in mind.
I encourage you to read the entire article as well as all the links they make references to. It is a great primer for learning how to appropriately price your products and services. I can assure you it’s better than throwing spaghetti against the wall!!