Do Pricing First, Not Last

Creative people love making things– widgets, software, knowledge, service calls.  A lot of businesses and product lines get started this way.  Someone has a cool idea to make something.  Skeptics shoot down the idea.  The founder or engineer makes it.  Eureka!  Triumph!  Now, how to price it?

At this point, you’ve done the hard work.  Hard work meaning that it’s hard to go back and change it.  So you’re stuck pricing what you created.  The typical train of thought goes like this:

Product > Cost > Price > Customer

Now when you get to the customer, you don’t know if you’re delivering the right value, making it harder for sales and marketing to find prospects and close sales.

Imagine instead if you had started with a customer problem.  You could then figure out how customers tried to solve that problem today and how much better, if any, your solution would be.  How much would it be worth to the customer?  Given that value, can you product the product or deliver the service profitably?  What might you have to change?  At this point, it’s easy to change, because you haven’t done the hard work yet.  This train of thought looks like this:

Customer > Value > Price > Cost > Product

How do you think about price and value?

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