Summary List Placement
Most startups are leaving money on the table when it comes to pricing their products and services (see part one of this series). Successfully matching price to value — identifying the highest price customers will comfortably pay for your product or service — requires a pricing process or a systematic approach to user research and experimentation.
It’s common for startups to not know where to start when it comes to monetization.
In my conversations with founders, I often ask about how they derived their original pricing and packaging. Their approaches tend to fall into three categories:
They winged it: Surprisingly, many companies set pricing in an arbitrary way. Months are spent laboring over the product and design, yet pricing is treated as an afterthought. People will sheepishly confess that they “just picked something” at the last minute.
They priced low to gain market share: The second category is made up of companies that price artificially low in a “land and expand” strategy designed to capture users quickly. The problem with this approach is that it can inadvertently cheapen the product for both the short- and long-term.
In exchange for user growth, companies can be saddled with the inability to drive meaningful revenue expansion …read more
Source:: Businessinsider – Strategy