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A guideline and reference for struggling entrepreneurs on how to price products/services that they sell!
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Yoda, how do I price what
I sell?
How to Price what you Sell?
Alok Rodinhood Kejriwal
Founder – 2win group & therodinhoods
Why?
Why this PPT?
I’ve sold crazy s*** in the past 29 years. From infant socks to oil drums to LC (letter of credit) discounts to advergames to virtual cars in mobile games. In the process, I’ve always been confronted with the question “How do I price this?!”
I’ve also come across zillions of newly minted entrepreneurs struggling with this tough question.
Wrong is the Question you
Ask…
The wrong question!
After deep reflection, I have realized that the Question itself is WRONG.
Yup. Pricing doesn’t matter. It’s a ‘side effect’, an ‘occurrence’, a ‘consequence’.
In the next few slides, I shall explain why…
Exercise 1
Carefully study the next chart and THINK of products and services (not related) that fit in
the (?) Boxes
? ?
? ?
Innovative
Ordinary
High $$$Low $
Need a nudge?
If you didn’t understand the chart, try this:
- The Top Right Box (green) represents something that is High in $$$ (price) and Innovative
- The Bottom Right Box (blue) represents something that is High in $$$ (price) and Ordinary
- The Top Left Box (pink) represents something that is Low in $ (price) and Innovative
- The Bottom Left Box (purple) represents something that is Low in $ and Ordinary
Now think of products and services that fit the chart.
Once done, go the next slide where I reveal my choices.
Post-it Notes (3M) iPhone
Everything Nothing
Innovative
Ordinary
High $$$Low $
Exercise 2
Volume vs. Price
? ?
? ?
High Volume
Low Volume
High $$$Low $
Lays Chips Rare or Nothing
Anything Rolls-Royce
High Volume
Low Volume
High $$$Low $
Exercise 3
Losses, Profits & Volume
? ?
? ?
High Volume
Low Volume
LossesProfits
Coke e-Com Companies
Services firms
Failed Startups
High Volume
Low Volume
LossesProfits
Exercise 4
Impulsive vs. Informed Buys
? ?
? ?
High Volume
Low Volume
ImpulsiveInformed
Grocery iTunes
Luxury Goods
Airport Shopping
High Volume
Low Volume
ImpulsiveInformed
Exercise 5
Volume vs. Competitors
? ?
? ?
High Volume
Low Volume
High Competition
Low competition
GoogleSearch Mobile Apps
Pet Shops Bridal Services
High Volume
Low Volume
High Competition
Low competition
Relief!
No more charts
(feel free to create your own exercises using more parameters)
What did you learn?
Question
Let’s examine the charts once again, grouped together:
Analysis
Free to Unaffordable with Zero/Little Competition
Free
No /Little Competition
Low Price
Post-it notes
No /Little Competition
High Price
iPhone
No /Little Competition
Unaffordable
Rolls-Royce
No /Little Competition
Irrational to High Pricewith Massive Competition
Irrational (Free) Price
Flipkart
Lots of Competition
Low Price
Grocery
Lots of Competition
Medium Price
Services: Firms like ad
agencies/Hiring firms
Lots of Competition
High
Luxury Goods(Watches)
Lots of Competition
Now ask yourself, which of these Companies would YOU rather be?
Conclusion 1: Pricing doesn’t matter when
You sell INNOVATION
Google or Apple
Pricing DOESN’T matter
Conclusion 2:Pricing does matter when:
You sell what OTHERS sell
Services businesses
Pricing DOES matter
Meta Conclusion:Stay on the left. Price IS immaterial.
Low Price, Low Volume
High
High Price, High Volume High Price, Low Volume
Low
Zero Price, High Volume
HighLow HighLow
Low Price, High Volume High Price, Zero Volume
iPhone Rolls-RoyceCartier
General Services
CokeLaysiTunesPost-its
Bose FBGoogle
CompetitionCompetition Competition
Luxury Goods
MobileApps
Duty Free North KoreaBridal Services
Super famous paintings
What’s with the guys on the left who DON’T care about Price?!
GoogleApple
•Unbeatable technology•Patents, IP
Rolls-RoyceCartier
•Perfection of product•Brand recognition (built over years)
What’s with the guys on the right who only care about price?
Services Firms (ad agencies, recruitment
services, etc.)
•Me-too, competing on price•Marketing via personal contacts•Very people-dependent
Niche service providers
(e.g. Bridal services)
•Competing for small volumes•No guarantee of sustainability or profits
Conclusion:
• FREEDOM from pricing comes from Innovation,
Perfection, Technology and Creating IP; NOT from clever
Costing, cut throat Competition or gushing Volumes.
• Service firms (e.g. Infosys, TCS, Wipro) have built
Pricing POWER by mimicking great product companies.
• Pricing is NOT about Cost + Profits.
It’s about Delight + Uniqueness.
How to Price?Don’t think of cost &
margins. Instead think of HOW you
will be unique in your offering
Introduce INNOVATION, IRRESPECTIVE
of whether you price it or
not!!Keep delivering
PERFECTION no matter how ordinary your
sale. Perfection is a
long term price ruler
Constantly create IP. That will make you
develop PRICING POWER
Disclosures:
• The principles and guidelines spoken about in this
presentation are strictly my own ideas and MAY NOT be
feasible/practical for you.
• This document should serve as a guideline and
reference - not as a rule book!
Liked this presentation? Go through some more!
• Basic Funding Concepts for Entrepreneurs
• How to write effective e-mail proposals
• How to make an engaging PPT
• PR for Startups – a reference guide!
Connect with me!
e-mail - [email protected]
Facebook - facebook.com/rodinhood Twitter - @rodinhood
My social network for anyone enterprising! therodinhoods.com
Presentations – www.slideshare.net/rodinhood
