Setting Your Pricing Policy

Your pricing strategy depends on three key factors: the type of product you’re offering, the nature of the market you’re selling in, and your competition’s offers.

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Basic types of market and competition

You compete with the traditional, big players as a newcomer. In this situation, you’ll face fierce competition as you fight to gain clients through lower pricing or by offering a product of significantly higher quality. You will require aggressive pricing and marketing, and you can expect heavy losses initially, so you should have a strong capital buffer and a patient investor.

You create a specific product or service, or a small niche business. In this case, you will have to estimate how many clients you will potentially gain; you’ll also need to assess how effectively you can attract your prospective customer base. You won’t be facing intense competition, so you'll have greater control over pricing, but you’ll have to scale your company to ensure its survival. This means you’ll be able to afford a higher margin, but you’ll also need to focus more on cost control.

A completely new opportunity, technology, or product, aka "Blue Ocean." Targeting this kind of market is highly risky—and potentially highly rewarding. If the market potential is high, it will attract corporate players and other startups. You’ll have to adapt quickly to your competition’s actions, in terms of both pricing and product development. Your greatest challenge in this case will be balancing pricing to get enough clients without overspending and losing favor with your investors.

Product types that affect pricing and monetization strategy

Digital products

Clients simply pay for your digital product or service. You could attract clients with, for instance, a free trial period or freemium model, or you could offer different service levels, such as Free, Basic, and VIP. To understand what clients are willing to pay for, you’ll need to test your digital products in the market you’re serving.

Subscription model

Clients pay a recurring fixed fee to use your product or service for a set amount of time. You can offer subscriptions to service packages of different levels and prices to steer customer spending behaviorally.

Intermediary platforms

You can also sell your product through a third-party platform that charges you a fee based on transaction number or value. You must understand which side of the transaction pays—buyer or seller. The cost impact can be the same, but one side simply doesn’t pay a fee.