This page provides initial guidance for how to determine pricing for your organization’s offering. For many of your projects, it might be too early to complete the full cycle below. However, when you are ready, please reference the slides to get more in depth guidance on the various steps.
Please duplicate this page to your own Notion to work in the tables.
If the sections are closed, please click on the little arrow to the left of the header to open and close each section.
Many organizations make the mistake of defining their price based on their costs, rather than their value, competition, and strategy.
So let’s take some time to first define your value. If you recall, your Total Value is equal to your Reference Value + your Differentiation Value.
Use the table below to begin defining the Total Value of your product. Note — you may need to create duplicates of this table for different customer segments.
| | Inputs | Value | Does this information need to be collected and/or validated? If yes, how will you do so? | | --- | --- | --- | --- | | Reference Value The price (adjusted for differences in units) of the customer's best alternative - includes direct competition, homegrown solutions, or alternative solutions | | | | | Positive Differentiation Value The value to the customer of any positive differences between your offering and the reference product | | | | | Negative Differentiation Value The lost value to the customer of any negative differences between your offering and the reference product | | | |
Total Value = Reference Value + Positive Differentiation Value - Negative Differentiation Value
Your Total Value = (Fill in here)
Here are some other considerations you might take before setting your pricing strategy hypothesis:
| Inputs | Value | Does this information need to be collected and/or validated? If yes, how will you do so? | |
|---|---|---|---|
| Cost-to-Serve | |||
| How much does it costs your organization to deliver a product or service to a specific customer, segment, or channel? (This includes more than just production costs - think through customer acquisition, onboarding, compliance and overhead, etc) | |||
| Perceived Value (“Willingness-to-Pay”) | |||
| How well does the customer understand the value? | |||
| Customer's Sensitivity Drivers | |||
| Look for non-value related determinants of price sensitivity. For reference, we have included a toggle below. | |||
| Customer's Approval Levels (“Ability-to-Close”) | |||
| How easily and quickly the person you’re talking to can approve and finalize the purchase? |
Total Value vs Cost, Price, Perceived Value