Live Q&A Session with Mayank Kumar

Co-Founder, MD, UpGrad

Introduction to the
Company

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Agenda for the session

1 Introduction to Pricing

2 Pricing Strategies

3 Do’s and Don’ts

4 Open Q&A

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Why is pricing important?

Revenue

Services
Market Position
Provided

Pricing

Distribution
Buying Decision
Channels

Marketing and
Sales

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Traditional economics for price determination

Demand Curve Revenue Curve

$50*75
$10 $3750

Choose Price which gives $10*200 $100*20

$50 Maximum Revenue! $2000 $2000

$100

200 75 20 200 75 20

Pricing is not MATH

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Agenda for the session

1 Introduction to Pricing

2 Pricing Strategies

3 Do’s and Don’ts

4 Open Q&A

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Cost Plus Pricing

Cost-Plus

• Simplest pricing technique

• Calculate cost of producing/delivering your product/service

• Apply % markup to earn target rate of return

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Value Based Pricing

Customer Segmentation Insights into Customer Preferences Perceived Value of Product/Service

1. Identify different types of customers and
understand behaviours separately:
• Lowest Priced Product Buyers
• Value Buyers
• Loyal Premium Buyers
1. Do some methodical customer surveys
• Eg: Van Westendorp’s Price Sensitivity Meter:
• A direct approach for pricing research
• Assumption: Customers have some idea of
value of product
• For details refer to: Van Westendorp Technique
for Pricing Research
1. Perceived Value – The value that customers
think your product delivers
2. Increase perceived value through:
• Better marketing
• Give a value relative to another product
• Price Decoy

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Competitive Pricing

1. Charging a price that is comparable to what competitors are selling the same item for

2. There is little to distinguish among the products offered by competitors

3. Prices are generally set by market leader and other follow by matching these prices or offer at
comparable prices

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Comparison for Pricing Strategies

Cost Plus Value Based Competitive Pricing

Pros Cons Pros Cons Pros Cons

• Easy to • Does not take • Based on clear • Competition • It is fairly simple • It might lead to
calculate demand into understanding may lower and requires large missed
account of customers prices and little research opportunities
and their needs capture more
• Useful when info • It is low risk and • It assumes that
market share
on demand is • No way to can be fairly competitors
unavailable determine if accurate have identified
customers will • Less useful the correct price
buy at set price when pricing for
budget
customers

Useful when selling tangible

products such as phones, Useful when selling services Useful for every business
clothes etc.

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Tips on Pricing – Use to validate your price points

Industry Sales and A/B Testing on

Metrics Break Even Customer Price
Benchmarking Point Acquisition

• Gross Margin which is • Break even – point • Run small marketing • Don’t offer the same
Revenue – Service when total revenues campaigns product at different
Cost equals total prices
expenditure • Check how different
• CAC and LTC. As price points affect • Check for price
industry practice: LTV • Check whether price acquisition sensitivity – change
~ 3*CAC point(s) make for a services or product
feasible break-even features and check
point conversions

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 Pricing Options for Startups

Pay Per
Usage

Dynamic
Subscription
Pricing

From Pricing
Strategies to
Pricing
Options

Freemium Commission

Ads

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Agenda for the session

1 Introduction to Pricing

2 Pricing Strategies

3 Do’s and Don’ts

4 Open Q&A

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Do’s and Dont’s Pricing

Do’s Don’ts

1. Research optimal price 1. Set it and forget it

2. Pricing is a continuous process 2. Cut prices drastically to sell more
3. Understand your customers 3. Overestimate LTV
4. Use pricing tactics like discounts 4. Underestimate cost structure
5. Take cash flow into account 5. Give discounts that aren’t limited in time

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Agenda for the session

1 Introduction to Pricing

2 Different ways of Pricing

3 Pricing Strategies

3 Open Q&A

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Open Q&A

Write Your Queries in the Chat Window

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