Determining the right price for your products or services can be a complex task for entrepreneurs. We’ve gathered insights from founders and CEOs on their most effective pricing strategies, from implementing penetration pricing initially to strategizing comprehensive cost markup. Discover the diverse approaches in these fifteen answers that could help you find the optimal pricing for your business.
- Implement Penetration Pricing Initially
- Apply Cost-Plus Pricing Method
- Match Competitor Pricing Levels
- Focus on Customer-Perceived Value
- Adopt Tiered Pricing Models
- Price Based on Client Value
- Combine Market Research With Costs
- Adjust Prices to Stay Competitive
- Employ Tiered Subscription Model
- Customize Pricing for Client Diversity
- Conduct A/B Testing for Price Points
- Price With Personal Integrity
- Utilize Dynamic and Performance-Based Pricing
- Experiment With Customer-Driven Pricing
- Strategize Comprehensive Cost Markup
Implement Penetration Pricing Initially
We used penetration pricing at the very beginning stages to rapidly capture the market share we needed to compete in a saturated industry crowded with major players. Our goal was to appeal to price-sensitive buyers seeking value and affordability. This strategy enabled us to not only establish a foothold in our target market but also enhance the attractiveness of our supplementary products. Over time, as we solidified our market position, we gradually adjusted our pricing.
Jasper Knight
Founder, Secret Saunas
Apply Cost-Plus Pricing Method
Determining optimal pricing involves a few key steps: analyzing costs, studying competitors, and understanding customer value perception. A cost-plus pricing strategy works well for many entrepreneurs. This method involves calculating the total costs of producing your product or service and adding a markup to ensure a profit.
For example, in our SEO services for cleaning businesses, we calculate the total costs of delivering our services, including tools, labor, and overhead. We then add a reasonable profit margin. This ensures our prices are fair, competitive, and profitable.
To illustrate, if our total monthly cost for SEO services is $500, and we want a 20% profit margin, we’d price our services at $600 per month. This transparent approach builds trust with clients and ensures we cover our costs while making a profit.
In summary, use cost-plus pricing to ensure your prices cover costs and generate profit, while remaining competitive and transparent.
Zeeshan Siddiqui
Founder, SEO for Cleaning Services
Match Competitor Pricing Levels
A lot of people will recommend value-based pricing. For some, it can work. But for many, it won’t. It tends not to be grounded in reality most of the time.
If you have three competitors charging $150-$250 and you’re trying to charge $2,000 for the same service (because of the value you claim to bring), you’re going to have a bad time.
My best advice for starting out is to begin at a similar level as your competitors but bring more value than they do. Eventually, you can test other prices, whether you want to raise them or lower them.
But if you have competitors, and they all charge around the same price (most of the time, this will be the case), the research has already been done. You just need to get out there and start offering your services.
David Martirosian
Founder, Galaxy Growth Media
Focus on Customer-Perceived Value
First off, forget about just looking at your costs or what your competitors charge. That’s old news. Instead, focus on the value you bring to your customers. It’s all about understanding what makes your product special.
Chat with your customers. Ask them how your product helps them. What problems does it solve? How much time or money does it save them? These conversations can give you a goldmine of information. Once you’ve got that information, put a dollar value on it. Then, set your price as a chunk of that value. This way, your customers still feel like they’re getting a great deal. This approach lets you earn more while still giving customers a reason to choose you.
Plus, it shifts the focus from “Who’s cheaper?” to “Who’s better?” But don’t just set it and forget it. Keep an eye on things. As you improve your product or the market changes, you might need to adjust your prices.
Pricing is as much about psychology as it is about math. So don’t be scared to play around with different prices or how you present them. You might be surprised at what works best. Finding the right price is like finding the right pair of shoes. It might take a few tries, but when you get it right, it feels great and takes you places. So keep experimenting until you find that perfect fit for your business and your customers.
Yoyao Hsueh
Founder, TopicalMap
Adopt Tiered Pricing Models
We’ve fine-tuned our pricing strategy through a combination of data analysis and customer interaction. We conduct detailed market research and analyze the pricing models of our competitors to understand industry standards. We also gather direct feedback from our customers to assess the value they derive from our offerings.
One strategy that has worked exceptionally well is tiered pricing. Initially, we launched with a single pricing model but soon realized the need for more flexibility. For instance, our Agency plan, priced at $79 per month, includes features like 20 social profiles, bulk scheduling, and white-label reports. This plan significantly increased our subscriptions among social media agencies seeking scalable solutions.
This approach has allowed us to maximize revenue and ensure customer satisfaction by offering plans that best fit varying business needs.
Dinesh Agarwal
Founder, CEO, RecurPost
Price Based on Client Value
As the founder of a marketing agency, I determine pricing based on the potential value and impact for each client. For example, one medical practice was spending $5K/month on advertising with little return. We proposed a personalized digital marketing strategy for $2K/month. Within three months, their new patient consults increased by 30% and revenue was up by 15%. Given these results, we were able to increase our fees to $3K/month to scale their growth further.
For a new client, I evaluate their business objectives and metrics to project the potential impact of our services. A simple website may be $1K, but an integrated digital marketing campaign is $3-5K. Our pricing reflects the custom strategy and testing required to achieve real results. An effective approach is offering a free digital marketing audit to demonstrate our value. By the end, our pricing seems reasonable for the potential growth.
Some tips for entrepreneurs: know your costs and ideal margin; evaluate competitors; consider your experience; offer free audits or samples to build trust; start with a higher price (you can negotiate); and revisit pricing as you achieve results. The key is pricing based on value, not just costs. My mission is empowering clients to achieve their biggest goals and impact more lives. Pricing should reflect that value.
Jeff McGeary
Founder & CEO, PracticeVIP LLC
Combine Market Research With Costs
Before Cafely went live, we conducted market research to see what our competitors’ prices were. We also conducted surveys to determine what potential customers were willing to pay for and which products they preferred. These initial steps are important to ensure you come up with competitive pricing. But the very basis of your pricing should, of course, come from the costs—from production to manufacturing, labor, overhead costs, and other expenses. You then use the data gathered from your research to determine a profitable margin.
The coffee industry has bloomed over the years; you’ll find at least two coffee shops in your immediate area. Thus, I find it important to have at least one foot in the door. We achieved this by going live with introductory prices. It worked well for Cafely since it attracted coffee lovers to try us out.
Another pricing strategy that worked for us is pricing our coffees at different levels—low, mid, and high. This helped us gather data on which products perform best, helping us focus on what customers want and what could be improved. This inspired us to launch Club Cafely, a subscription-based coffee club. It has been highly effective in boosting our sales, attracting new customers, and ensuring a steady revenue.
Mimi Nguyen
Founder, Cafely
Adjust Prices to Stay Competitive
To decide the optimum price of the products, we first look at the manufacturing cost, market trends, and customers’ perceptions of their value. We offer one of our best strategies: pricing our products competitively.
We track our competitors’ prices daily and adjust ours to stay competitive. We also try to price-match to attract good traffic who think they’re getting the best price. This has been vastly successful, as we have gained some price-sensitive customers and maintained steady volumes while gaining their trust.
Moreover, this strategy is considered a strategy that helps our business grow—not only by winning the price competition but also by not being priced out of the market and preventing our customers from going elsewhere. Our consistent approach to charging competitive prices and always offering our best value proposition has increased client retention. At the same time, those who know us confirm that our company gains a good reputation as a client-oriented business.
Jason Brooks
Co-Founder, UK Linkology
Employ Tiered Subscription Model
Understanding the intersection of market expectations and perceived value has been key to crafting successful pricing strategies for my ventures. With Docsity, a global online community assisting students worldwide, we implemented a tiered subscription model. The motive was to provide basic services for free while making profits from premium offerings. This appealed to various groups of users and their differing abilities to pay, hence boosting our revenue stream.
At the Open Institute of Technology (OPIT), on the other hand, we held a strong value-oriented approach. We focused on high-quality yet affordable education; hence, our pricing was adjusted to reflect this promise of delivering exuberant value for lower costs. Close monitoring and timely adjustments, always keeping in the loop students’ feedback and market trends, have served as the backbone of our pricing strategies. This approach has not only been mutually beneficial but also attracted a broad student base for our services, validating our pricing models.
Riccardo Ocleppo
Founder & Director, OPIT
Customize Pricing for Client Diversity
As a software and web development company, we thrive on custom pricing, billed per month depending on how many hours we work on the project—since we have a diverse pool of clients with various needs and budgets. However, we noticed a growing demand from customers who want to be billed once for a project. Many dislike committing to a monthly payment model since they only look at the final product, for example, a finished website or app. However, the challenge here is that most of our competitors don’t reveal their prices, so we are unsure if we would lose money with this change, if ever.
To address this, we need to compare our pricing with our competitors’. One way is to ask someone from the team who has worked with our competitors in the past to share the pricing they can remember for the services. Another tip is to pose as a client and ask a competitor about their pricing, since most of them don’t reveal their pricing on their website. This helps us ensure our rates are competitive and align with market expectations, ultimately allowing us to cater to both monthly and one-time payment preferences effectively. The thing is—you can only do so much with pricing; you cannot charge so high compared to your competitors, unless you offer something unique or special that others can’t deliver.
Another approach we use is bundling services together at a discounted rate. This encourages clients to purchase multiple services from us rather than just one, ultimately increasing their overall satisfaction and loyalty to the services we offer.
Vikrant Bhalodia
Head of Marketing & People Ops, WeblineIndia
Conduct A/B Testing for Price Points
Use an A/B-test approach. Test price points across your geographic markets to determine acceptable upper limits. For instance, we tested pricing within our top three markets and found that the U.S. market was more willing to pay a higher price. We’ve adjusted prices to reflect that, while implementing a marginal increase in product prices in our other markets due to customer price resistance.
Simon Bacher
CEO and Co-Founder, Ling
Price With Personal Integrity
I’ve been a serial entrepreneur for over 30 years. My pricing strategy today, as a business coach and midlife mentor, is slightly different than it used to be. It used to be much more analytical and transactional—which left me always longing for more, despite the financial success. Today, there is the analytical part, but it is no longer decisive. It gives me direction, but ultimately my heart determines the price. It’s about integrity and making myself available to those who need me the most. Because this, in return, is in alignment with how I define success for myself today, on a very personal and meaningful level.
Sabine Schopke
Serial Entrepreneur, Bestselling Author, Podcaster, Business Growth & Midlife Guidance Coach, Sabine Schopke
Utilize Dynamic and Performance-Based Pricing
We employ a dynamic pricing strategy that allows us to adjust prices based on demand, market conditions, and client engagement levels. This flexibility helps us remain agile in a fast-paced industry, responding to seasonal trends and changes in demand with pricing that matches. For instance, during peak periods of demand for digital marketing ahead of major shopping seasons, we might adjust prices slightly to manage workload and maximize efficiency. It’s a balancing act, similar to airlines adjusting ticket prices, ensuring optimal operational capacity and client satisfaction.
Performance-based pricing has strengthened our client relationships and underscored our commitment to results. Under this model, our compensation is tied directly to the outcomes we achieve, such as specific KPIs like traffic increases or higher rankings. This aligns our goals with the clients’ and ensures that we are fully invested in their success. It’s a win-win: clients feel secure in their investment, knowing they pay for tangible results, and we are motivated to perform at our best.
Jason Hennessey
CEO, Hennessey Digital
Experiment With Customer-Driven Pricing
Start with customer discovery. Conduct customer interviews and survey prospects to understand their beliefs about your product or service, what the value proposition is for them, and how price-sensitive they are. Then experiment with different price points, structures, bundles, etc.
Jason Anderson
Attorney, Anderson Law PLLC
Strategize Comprehensive Cost Markup
Our company uses a complex cost-determination scheme. We precisely calculate all our expenses required for a tour, including depreciation, maintenance, and car washing; advertising; staff salaries; and company profits, which, by and large, are smaller within one tour. At the same time, we want to reassure our clients that we are committed to providing the highest quality of service. This commitment is at the core of our operations, as we believe that our activities would not make any sense without it.
In our business, we take a strategic approach to pricing. We consider all factors and make a certain markup for a particular tour. This approach allows us to keep our prices competitive, even in the face of factors like competition and the popularity of the destination. We don’t raise prices much higher because we understand the importance of staying competitive in our field. However, our clients can be confident about getting the best value for their money.
Andriy Bogdanov
Entrepreneur, Travel Expert, CEO and Founder, One Day Tours Portugal
