Price is the most important element of a startup’s marketing. It defines your marketing positioning, your profitability and even your success. To better understand the importance of pricing and help startups to define it clearly, the Technoport hosted, on Monday 27 June, a workshop named “Lean Pricing”.
Price is not what you think you can charge, but what your customers are willing to pay based on the perceived value.
Omar Mohout, professor of marketing at the Antwerp Management School, offered extensive insight about how to define the right price, given the value offered, costs, clients’ alternatives and market specifics. “Price is not what you think you can charge, but what your customers are willing to pay based on the perceived value”.
Omar showed various pricing methods; the “Silicon Valley Rule of Thumb” where customers get at least 10 times the price value, the “Customers Interviews” where you explain your added value and your price to get feedback, the right price being the one your customer accepts but with a little resistance, the “Industry Benchmark” where you use your respective industry gross margin, the “Break-Even Point” where you define the minimum revenue to stay alive or the “Anchoring Benchmark” where you compare your product to something much more expensive, anchoring an added value in clients’ mindset.
You are startups. You are hungry. So go and don’t be afraid to eat”
When negotiating your price, Omar’s advice is “It’s the side that has the most information who controls the deal. Just ask questions and don’t make statements. Everything is negotiable, so negotiate everything”.
Last but not least, Omar advices startups to avoid the free model trap. Even for pilot customers, you should never do it for free, but ask something in return, even if it’s just a referral. “You are startups. You are hungry. So go and don’t be afraid to eat”!