As an advisor to new business owners, I’m accustomed to seeing primarily the simple traditional product pricing strategies, usually driven by competitor prices, or cost plus a reasonable margin. I often wonder whether you as the entrepreneur have worked as hard on your pricing strategy as you have on your innovative solution. I hate to see money left on the table through poor pricing.
For example, I believe that Starbucks surprised most people by proving that they could take a commodity business, a coffee shop, and make it a worldwide profit winner, just by justifying premium pricing with a quality product, the right locations, personalized service, and appealing to the professional customer personas.
As I look around at other great businesses out there, I see many have incorporated innovation into their pricing strategies, as well as their products or solutions. By definition, true innovations are things we haven’t seen yet, but here are a few pricing alternatives that have contributed to the success of companies I know, and I recommend for evaluation by every business leader:
Charging a premium for your technology innovation. If your innovation is real, it brings added value to the table, so most customers, especially early ones, are willing to pay a premium over competitive products. Later, when that innovation becomes the new norm, you must be prepared to lower your price to meet new competitors.