Pricing for Start-Ups and Scale-Ups

Pricing for Start-Ups and Scale-Ups

PriceBeam has extensive expertise in helping growth companies, start-ups, and scale-ups improve their prices, often to the tune of millions in profit improvements.

Pricing for Start-Ups and Scale-Ups

According to McKinsey, more than half of all startup-failures are due to pricing errors. By pricing errors, we mean that they set their prices too high to attract sufficient number of customers or too low to both attract sufficient number of customers and provide the company with the revenue needed to sustain and grow the business. Or that their pricing structure detracts from the value they provide to their customers and, therefore, willingness to pay decreases.

Why is that? In the vast majority of cases, startup companies simply guess what they should charge for their product or service. They may look at some competitors and companies with similar products or services to find out what their prices are and try to price similarly, but who says these competitors have the right prices? Furthermore, companies that are new to a market and have a unique product or service will generate a different willingness to pay than that of the incumbents.

PriceBeam changes all that. Entrepreneurs obtain precise advice on how to price their new product or service and, therefore, capture the unique value they bring to their customers, eliminating the risk of failure due to pricing errors. Some of the areas we help with include:

  • Price Positioning & Strategy
  • New Product Pricing
  • Market Launch Pricing, often the result of an investment
  • Value Communication
  • Price Increase Implementation

Price Positioning & Strategy

Setting the overall price position against other products in the assortment, or against competitors, is a challenge for most start-ups or scale-up companies.

If you need to price a product (or service) in a new market, it makes all the difference in the world if you understand customers' willingness-to-pay. 

Demand / WtP curves like the ones above, show the optimal price point where the curve peaks. In this example, the best price to optimize quantity is 10, whereas the optimal price for optimizing revenue is 15. 

In the old days when research was expensive, this could be difficult to get through a corporate approval if launching in many markets at once. These days, with cost-effective research options from e.g. PriceBeam, the cost of getting these crucial insights should no longer be an issue.

Price Positioning
Feature Value Matrix

Feature Value Matrix

Understand consumers’ willingness-to-pay for different product features and use such insights to optimize your product offering through add-ons and identification of salient features wanted by your target customers.

With PriceBeam´s Feature Value Matrix you can identify for which of your product features or benefits are customers willing to-pay, and how much. Understanding customer value of such attributes is essential in order to customize your product as necessary, wherever there is a potential fit. This is crucial to drive sales up, through attraction of target audience and additional features, as well cutting down on losses from features that aren’t valued.

New Product Pricing

Almost by definition, start-up products or services are new products. With PriceBeam you can understand customers' or consumers' willingness-to-pay for new products, and use such insights to optimize prices when launching innovative products.

New Product Pricing

Innovation is crucial for many brands. In some industries, especially selling to consumers or in technical verticals, it is quite common that 20-30% of all products sold are recently launched. Companies spend many millions in launch marketing and advertising across multiple channels. However, they often struggle to set the right price. With PriceBeam's price research, you can test different concepts and communication strategies before launching, and understand consumers' willingness-to-pay for those options. This provides solid facts and improves the likelihood of success of the launch, when launch prices are aligned with value perception of the consumers.

Market Launch Pricing

Setting the right prices when launching into new markets is often a challenge facing companies with recent investments. In particular in venture capital investments, such investments are designated to expand into more markets. PriceBeam helps understanding market differences and setting optimal price points for each.

Market Launch Challenges

Pricing Managers, Marketing Managers, and Sales teams often find it more difficult to get pricing right when launching a product in a new market, as opposed to pricing the same product in an existing market. In theory existing-market pricing should go through the same steps as new-market pricing and look at value drivers and willingness-to-pay, but in many situations existing markets mean there is a reference point to base the price on. Such a reference point is lacking if pricing for a new market.

Market Launch Pricing

Value Communication

Understand the benefits and features that consumers value as well as those attributes that don't impact consumers' willingness-to-pay

Value Communication & Pricing

While overall willingness-to-pay is a useful start, for really professional new market pricing, the next step should be to break down the willingness-to-pay into the individual value drivers. For what features or benefits are customers willing to-pay, and how much.

A good method for understanding the individual value-drivers is to use choice-based conjoint analysis. In this type of research (see e.g. PriceBeam's solution), respondents are shown a set of product choices. He/she then chooses his preference and is shown a new set of choices with other configurations; and again; and again. Through the choices it is possible to determine how much value the respondent puts on the individual features. The outcome: a series of value-drivers and the value potential customers put on them in the new market.

Price Increase Implementation

Prices should not be static. Quite the contrary, it is best practice to adjust prices upwards regularly, at least in line with competition and inflation, but often also higher thanks to brand innovations. Many if not most start-ups and scale-ups are often under-priced versus what the market is really willing to pay, maybe due to lack market courage, or because price competitiveness played a (too) dominant role in the company's early stages.

Quite often overlooked when pricing a market launch is what happens next year. Or the year after? Make a plan for how prices should evolve over time in the new market. Do you start high and then gradually lower the price as the product matures or becomes obsolete? or do you start low and then introduce price increases? 

The answer should really lie in what the expected willingness-to-pay is over time. In most businesses and industries, it is likely to be a more solid strategy to start high and then over time reduce the price is necessary. This is often associated with human psychology, where it is easier to accept a price reduction than a price increase. Especially start-ups get this wrong, where they value themselves too low to begin with, and then struggle to increase prices later. But also big corporations get it wrong from time to time.

Price Increases

How Does It Work?

PriceBeam’s solution conducts extensive market research, collects and analyzes data before delivering a detailed report on your customer’s willingness to pay. This data will enable you to stick out from the competition, maximize profit, and set prices that aid your long-run brand positioning.

Define offering & target market

You describe your product/service on our cloud-based platform. You also define the target market to research.

Create Market Research

We add all the research details, statistical setup, etc. so you don't have to worry about it.

Conduct Market Research

We collect responses about the given product/service in the defined target market.

Analysis & Results

The results are aggregated, analyzed and presented in our cloud-based solution.

Why You Should Choose PriceBeam

PriceBeam delivers strong value on a number of fronts, which is why our clients choose us.

Scientific Results

PriceBeam's studies ensure statistically significant results about willingness-to-pay.

Fast Insights

Results as fasts as 48 hours in B2C and 1-2 weeks in B2C.

Immediate Value

1% change in price delivers 11% improvement in value for the average company.

Easy to Use

You define the product and target market. PriceBeam takes care of the research and statistical details.

Global Reach

PriceBeam studies can be run in 109 countries. PriceBeam takes care of the localization.

Cost Effective

Using cloud technology, PriceBeam studies cost a fraction of classic, old-fashioned market research.

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About Us

With a methodology that is confirmed to be accurate in thousands of projects, PriceBeam provides self-service market research to companies of all sizes that quickly, accurately, and affordably discovers your customers’ willingness to pay for your product or service.

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