Value-based pricing

Setting price from the economic value the customer receives, rather than from your costs or a competitor's list price.

Example

Saving three hours a week for a $60/hr manager is ~$780/mo of value, so $99/mo is easy to justify.

Important

It requires knowing the customer's economics, which is another reason customer interviews pay for themselves.

Related terms

  • Pricing — What you charge, how you charge it, and how the tiers are structured.
  • Willingness to pay — Evidence that someone will part with money, as distinct from saying they like the idea.
  • Value proposition — The concrete benefit a specific customer gets, and why it is better than their alternative.

Lessons that explain it

  • Pricing — Not what competitors charge. A statement about who you are for — and most early startups price far too low. (15 min)
  • Testing willingness to pay — The only reliable test is asking for money. Everything else is people being nice to you. (12 min)
  • Localisation, currency and pricing — Translation is the smallest part. Currency, payment methods and local price expectations matter more. (12 min)
  • Handling objections — Most objections are information, not resistance. The four you will hear constantly, and what each actually means. (12 min)

All 176 terms in the Founder glossary