[Strategy]-[$Pricing]-What topics need to think through?
There are several ways to price your product — your cost and economics, the value your customer will get, and the price competitors charge. Think through these three ways independently, then think about the overlap effects.
Your Cost and Economics
What does it cost for you to serve a particular customer, to have a product?
What is the margin or mark-up that you can have on top of this?
Think about supply and demand. <If you think only about cost, then you may not optimize your profit since you ignore the market’s factor-Demand>
Think about the incentives you give your customers to buy a little more volume, what discount do you give?
Value that your customers will get
What is their willingness to pay?
Whether you have different customer segments or not.
How will they make decisions?
How will they compare your product to other products?
Price competitors charge
Very often different competitors will tailor to different customer segments in the branded market (not commodity market).
It gives you an indication of what you can do to discriminate price points between different customer segments.
You can categorize this strategy by three lenses — (Consumer, Competitor, Economics)
Also, please think through the elasticity and discriminate while considering both Consumer and Economics; think through the Game Theory while considering both Competitor and Economics.
