How to price right for

start-ups?
SESSION 12
Pricing strategies for Start-ups

 Cost-led Pricing: Start by calculating all the costs involved in manufacturing the
product or delivering the service (variable costs), add the other expenses (fixed
expenses), and add certain margin (expected profit) to arrive at the pricing.
Pricing strategies for Start-ups

 Competition-led pricing: For a like to like product or service, determine what is

the competition offering to customers and match them.
 Once you are aware of competition pricing, you may also decide to sell either too
low or too high, to create a differentiation for your company.
Pricing strategies for Start-ups

 Customer-led pricing :Ask your customer what he or she is willing to pay, and
offer it at that price.

 Penetration pricing

 Skimming pricing

 Pricing variations
 ‘off-peak’ pricing, early booking discounts, etc
Pricing strategies for Start-ups

 Premium pricing

 Economy pricing- placed at ‘no frills’, low price

 Value-based pricing: customer-centic

 Bundled pricing
 Razor blade model
 Loss leader pricing
Pricing strategies for Start-ups
• Adjusting Prices for Psychological
Psychological Pricing Effect.
•Price Used as a Quality Indicator.

• Temporarily Reducing Prices to

Promotional Pricing Increase Short-Run Sales.
• i.e. Loss Leaders, Special-Events

• Adjusting Prices to Account for the

Geographical Pricing Geographic Location of Customers.

• Adjusting Prices for International

Markets.
International Pricing • Price Depends on Costs, Consumers,
Economic Conditions & Other Factors.
Initiating
Initiating and
and Responding
Responding to
to Price
Price
Changes
Changes
Competitor
Reactions
to Initiating
Price Price Cuts
Changes

Price
Changes
Buyer
Reactions Initiating
to Price
Price Increases
Changes
Price-Adjustment
Price-Adjustment Strategies
Strategies
Has
HasCompetitor
CompetitorCut Hold
Cut No HoldCurrent
CurrentPrice;
Price;
Price?
Price? Continue to Monitor
Continue to Monitor
Competitor’s
Competitor’sPrice.
Price.

Will
WillLower
LowerPrice
Price
Negatively No
Negatively AffectOur
Affect Our
Market
MarketShare
Share&&Profits?
Profits?
Reduce
ReducePrice
Price

No Raise
RaisePerceived
Perceived
Can/ Quality
Quality
Can/Should
ShouldEffective
Effective
Action
Actionbe
beTaken?
Taken? Yes Improve
ImproveQuality
Quality
&& IncreasePrice
Increase Price

Launch
LaunchLow-Price
Low-Price
“Fighting
“FightingBrand”
Brand”