Technology How do you know if your unique product is priced perfectly? There is a magic formula
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Daniel D’Souza and his co-founders at Crescendo Inc. will tell you that finding the sweet spot for pricing a new product can be a tricky proposition.
When they launched their Toronto-based diversity and inclusion behaviour change platform for HR departments, D’Souza says, “There was a bit of experimentation up and down in trying to understand the right fit for the market and what customers are willing to pay.”
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Because their product is relatively unique, there was no one they could compare pricing to. “If you are truly experimenting with (pricing) boundaries, you will find a good ratio for proposals going through is 20 per cent. If the percentage of people saying yes is higher, your pricing is likely too low.”
They’ve now found their comfort zone for pricing, having learned some valuable lessons along the way, he admits. One of the hardest things to do was to step back and look at the reasons why a client wouldn’t want your product.
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“It’s something we do all the time now so we don’t get caught in the weeds focusing on one user or feature that doesn’t even matter to them.”
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Another was the need to put themselves in the individual buyers’ shoes. “You have to understand who specifically is buying your product, how they will sell your idea internally, and that individual’s specific challenges that you can solve. Empathizing with the buyer can create a champion who will sell your concept internally.”
Most small businesses need to look at pricing differently from larger operations, especially when it comes to digital products and services, says Hussam Ayyad, senior director of programs and partnerships at the DMZ at Ryerson University in Toronto.
Depending on the uniqueness of a product and the competitive landscape, taking the time to research the issue is critical, including market data, customers interviews, and comparing competitive performance.
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The number one mistake Ayyad often sees is considering only one model for pricing.
“Anchoring your pricing using one technique and not comparing it to others is not a good approach. The business may get to market and realize competitors are selling something that’s two times their price and not providing half the value. At that point you can’t go back and double your pricing. But if you had done enough research ahead of time, you could have saved yourself.”
Andrii Tsok, founder and chief technology officer of TRYON Technology Ltd, is in the initial stages of the pricing exercise for their augmented reality app that allows users to virtually try on high-end jewellery. The biggest concern for them was finding the optimal delivery mode, he says.
After spending months of looking at industry research and asking business owners about what business model would work better, they chose a software as a service option. “We found that would work best for all types of businesses, from independents to big enterprise.”
Maple, the telemedicine platform that connects patients and healthcare providers is now well past the growing pains of establishing a pricing model, says Dr. Brett Belchetz, co-founder and CEO. But he remembers all the complexities around pricing well.
Costco recalls infant formula due to possible Cronobacter contamination
Costco recalls infant formula due to possible Cronobacter contamination .The affected products include:Kirkland Signature Non-GMO Infant Formula for Babies Sensitive to Lactose in the 1.36-kilogram size, UPC code 96619 26926 6, Code EXP 2020 NO 05 T05DVBV.Kirkland Signature Non-GMO Infant Formula for Babies Sensitive to Lactose in the two-pack 1.36-kilogram size, UPC code 96619 23600 8, Code EXP 2020 NO 05 T05DVBV.The products were distributed across the country.People should not consume the infant formula. It should be thrown out or returned to the store where it was purchased.
“Pricing was tricky because in Canada, virtual care is not covered. So our challenge was determining what the doctors wanted to be paid and what consumers would be willing to pay for a virtual consultation. Also, because the concept was new, there was no precedent we could follow.”
They started their research with doctors because they were a smaller, more reliable group to survey, then followed that up with consumer research. “Google was one really efficient way to get survey data but you have to be very good at writing the right questions. Otherwise that data is useless,” he explains.
Pricing for the B2B market was much trickier. “We were selling to insurers and benefits providers that were offering the service at a flat rate to employees. We knew if we priced it too low, we could be bankrupted. If too high, we wouldn’t land a deal.”
To reduce the risk they started with smaller companies. “A big lesson for anyone is, don’t go for the big clients when you start,” Dr. Belchetz says. “If we began selling to companies with thousands of employees and the pricing was off by even a small amount, those multiples could have torpedoed our entire business. With smaller customers you can afford to take a hit if you get it wrong.
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