Published on July 18th, 2013 | by Jose Vasquez0
10 Questions for Determine Pricing in Startup Tech Companies
Even if you have the idea and the prototype down, you’ll need to set reasonable, long-term pricing in order to create a sustainable business plan.
Tech companies can sometimes forget how crucial setting a price for a product or service can be. You have to find a balance between what’s profitable and what people will pay—with room for flexibility as you learn more about your demographics.
Lisa Girard, of Entrepreneur.com, outlines 10 key questions you’ll need to ask yourself when determining pricing for your startup company’s products. While they do cover a lot of ground, I wanted to go a step further and elaborate on what some of these questions can mean for your business. With my tweaks to these questions, you can guide yourself to a better pricing structure when it comes time to take your tech products public.
1. Who is your customer? Make sure you understand or can at least identify your key demographics before you even think about pricing.
2. What is your customer willing to pay? You’ll definitely have to do some market research for this one—don’t just make a wild guess.
3. What are your competitors’ prices? Take a look at what others are charging for similar items. You may need to go higher or lower based on what you offer that’s different.
4. Are there multiple price points? As a tech company, this is almost a sure thing. Offer different levels of accounts or product lines.
5. How will you adjust your prices? This could be very simple or very complicated depending on your long-term plans.
6. Can you justify a higher price? If you’re charging more than your competitors, it better be worth it.
7. Is your price based on tangible or intangible qualities? This will help you market to the right people.
8. Can you bundle your products or services? Offer more for a lower overall price.
9. Can you afford an introductory or similar discount? This will come into play when you first release your products or services.
10. How will customers pay? This could affect the profitability of your product and how willing your customers are to purchase your products.
Once you answer these questions for your startup tech company, you’ll be in a much clearer position to set a first line of pricing. Keep in mind that your prices will most likely change as your business grows, but it’s important to come out with a strong sale.
Check out Lisa Girard’s original article here.