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