10 Pricing strategies for entrepreneurs

5028 reads

Pricing problems are not rare, and among all issues faced by startups, pricing is right on top. Though there is no perfect pricing method, I am sharing 10 pricing strategies for startups below:

1. Cost-led pricing

This is the most common pricing mechanism. 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. The pitfall of this method is its practically impossible to determine all costs as well as predict volumes required to recover them. Always keep a margin of 5-10% to be safe, rather than run into losses.

2. Competition-led pricing

For a like to like product or service, determine what is the competition offering to customers and match them. While pricing is an important factor for customers, you should have a compelling reason for your customers to buy from you apart from the pricing factor. 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.

3. Customer-led pricing

Ask your customer what he or she is willing to pay, and offer it at that price. Absurd as it may sound, this is one of the most efficient pricing mechanism (think about how you buy ads on google!).

4. Loss leader

If you cannot match your large competitors marketing muscle, then hurt them a little by offering low priced items. This will help you attract some customers, and increase your base. However, be careful - always enter this game knowing when and how to get out.

5. Introductory offer

If you are confident your customers will love you once they try your products or services, then start with introductory offers. This maybe free or heavily discounted - typically for 15-30 days after launch or for first 100 customers etc.

6. Skimming

Start as high as possible and keep coming down gradually. At the beginning of your venture, you may not know how much your customers will pay and how many will customers you will get. It is always good to recover maximum value at an early stage to ensure you remain cash flow positive.

7. Odd numbers

Bata's strategy of pricing shoes at Rs 499 rather than Rs 500 has got a lot to do with consumer psychology rather than MBA methods! Play with your price, keep them at odd numbers which will ensure customer recall!

8. One number

Remember the dollar store, where everything is priced at 1 dollar. This strategy will be profitable if you know what are the average prices and what will be the mix of items you are selling.

9. Bundled pricing

If you can bundle a set of products or services, with a perceived value higher than what customers pay for, it may increase your volumes and reduce your overheads per unit.

10. Range pricing

For a category of products, you can create a range starting from Rs 100 and go up to Rs 10000. This will allow you to sell the range of your company products or services to different category of customers.

The biggest problem in pricing at an early stage company is uncertainty - about customer traction, volume, orders, payments etc. Many entrepreneurs also feel shy about asking for money against services, and quite literally are taken for a free ride!

As an entrepreneur, we have to experiment with pricing to overcome our fears. In fact, the same product can be offered to different customers at a different price!

How? Imagine - whats the probability of getting 1 customer in 1 month - 1% (assuming 1 in every 100 prospect), whats the probability of getting 2 customers in 1 month - 1% * 1% = 0.01%, whats the probability that they will get to know each other and also share the pricing details = 1% * 1% * 1% = do your maths!

This article was originally published on:


jackcanfield's picture

Activating the Power of the Subconscious Mind

The untapped power of the subconscious mind can lead you to new success in your personal life and business life. Discovering how to turn your thoughts into positive and implementing the law of attraction into your daily life can take you to new
pradyumnanag's picture

How is it cheaper for Google to buy Groupon than internally build something like it?

 May be covered in some answers already by some fantastic answers.Just elucidating instead of replying on each of the posts. Though I may have my own personal reservations on the business model per se, they have been able to achieve something
changethis's picture

Willpower Is an Outdated Model of Success: Here’s the Future of Self-improvement

“It’s no wonder willpower has been placed under the media spotlight as essential to success. In a negative environment, willpower’s all we have left. It’s the life-raft, the backup parachute. And we’re depending on it to save our skins. It takes a


harvardbusinessreview's picture

How to Use Employee Referrals Without Giving Up Workplace Diversity

Incentivize employees to refer more women and people of color.
changethis's picture

A Better Business through a Great Place to Work for All

“What it means to be a great workplace has evolved. We have entered a new era, a new frontier in business. Our economy has evolved through agrarian, industrial, and ‘knowledge’ phases to the point where the essential qualities of human beings—things
danielhpink's picture

This is the secret to making better decisions

Hey, Hubspot and I just released two new episodes of the 1-3-20 Podcast.As you might recall, the podcast's name describes its format. In each episode I talk to the author of 1 book. I ask her 3 key questions (What’s the big idea? Why should I care?


jackcanfield's picture

How to Lead a Successful Training Workshop

If you want to become a successful thought leader, author, speaker, or simply share your message with the world, you must understand how to lead a successful training workshop. I am going to share with you my very own process – what we call The
Ron Kaufman's picture

Why Business Leaders Must Attend Service Training

The most common question we hear when launching service excellence training programs inside large organizations is: “Do leaders really need to attend these workshops?” This raises a different and more important question for senior leaders: Do you
richardbranson's picture

Here’s How to Overcome Embarrassment and Improve Your Self-Confidence

The Fear of Embarrassment IQ Matrix will help you to take control and eventually overcome the feelings of embarrassment you may experience in awkward situations. The article explores what it means to be embarrassed; highlights causes of