A lot of startups treat pricing as a math problem or, worse, an afterthought. Pricing is as much an art as it is a science, one that relies as much on marketing and psychology as it does on classical economics.
This Sequoia Guide covers strategies that can help you figure out the right price for your product—and end up with happier customers and more profit in the process.
The Sequoia Guide to Pricing
LinkedIn’s decision to package some seldom-used features as high-margin “premium” accounts spawned a business line that now makes almost $250 million a year. At eBay, touting the benefits of a low-cost tool meant the difference between profitability and a loss.
Meanwhile, companies that didn’t properly assess the value of their products and price them accordingly struggled or fizzled out.
Setting a price for a product is one of the most important decisions a company can make. But all too often it’s treated as an afterthought. Startups in particular have a habit of setting their price low to attract customers and never raising it, or keeping a feature free long after it’s clear people will pay.
“If you picked your price once and never changed it, it’s probably wrong,” says Phil Libin, chief executive of Evernote.