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How to Price your Product or Service


What is the optimum price for each business model and strategy combination? There are many business models and strategies you could use so let’s examine a way to find the right price.

For each model, establishing the maximum price your customers will pay and the cost of production of the Maximally Sellable Product (plus profit) will give you a price corridor. This corridor should be as large as possible (with cost of production much lower than maximum price). Within the price corridor are low and high options – potentially you could choose any.

Your decision on whether to go high or low should be based on how difficult it is for your competitors to imitate you. There are ten imitation barriers (of which, only one is patents) – the more barriers you have the higher value you can safely charge although there is a danger of ending up as a niche player. Choosing a low price gives you chance to grab the market and make it unfeasible for competitors to follow you but it impacts your potential profit.

This is a very basic overview of a pricing strategy – check out the following nuggets for greater insight and depth and try applying each imitation barrier to your proposition.


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