Value-based pricing
The goal of value-based pricing is to figure out how much your potential customers are willing to pay for a product / plugin.
Instead of looking inwardly at your costs, or towards your competitors, with value-based pricing this time you look outward. You go out and ask your potential customers what value they see in your product.
Pros | Cons |
|---|---|
The price reflects customers’ willingness to pay | It takes time to gather information from customers |
You get to know your customers | The value-based price might not fully consider your costs |
Overall, there are two major ways that a product or service can create value for customers:
It helps increase customers’ revenue
by increasing the number of their paying users
by increasing the customer retention rate
by increasing the average revenue per customer
It helps decrease customers’ expenses
by saving their costs
by saving their time
Consider answering these questions to understand how much value your product or service creates for your customers:
What pain points will the customer solve with a product / plugin?
What product / plugin feature is the least valuable for the customer?
What product / plugin feature is the most valuable for the customer?
What is the price that a customer wants to pay for the product / plugin?
What is the price that a customer is willing to pay for the product / plugin?
It is also worth checking your potential customers’ price sensitivity by asking these questions:
At what price would the customer consider the product too expensive?
At what price would the customer consider the product to be so cheap that they would not consider it?
At what price would the customer consider the product to start to get expensive?
At what price would the customer consider the product to be a ‘good value’?
Sources: Price Intelligently SaaS Pricing Strategy, The Anatomy of SaaS Pricing Strategy, The Power of Experimental Pricing, Toptal, Hubspot, Getcheddar Cost-Based Pricing, Medium, Getcheddar Value-Based Pricing, Price Intelligently.