Pricing Strategy Framework
Pricing is the most powerful lever in marketing — a 1% improvement in price typically has 3-4x more impact on profit than a 1% improvement in volume. This framework combines Van Westendorp's Price Sensitivity Meter (to find acceptable price ranges) with value-based pricing principles (price based on value delivered, not cost). It helps you move beyond cost-plus pricing to understand what customers are truly willing to pay.
When to use this framework
- →You're launching a new product and need to set the price
- →You suspect you're underpricing relative to the value you deliver
- →You want to introduce pricing tiers (good/better/best)
- →You're preparing to raise prices and need data to support the decision
- →Competitors have changed pricing and you need to respond strategically
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Figma (design tool, pre-2020 pricing)
1. Value Analysis
What's the quantifiable value your product delivers? Revenue generated, cost saved, time saved, risk reduced. Be specific.
What would the customer use instead? What does it cost? Your price should be anchored to this.
2. Van Westendorp Price Sensitivity
Survey customers with four questions. Enter the median responses to find the acceptable price range.
At what price would the product be so cheap that you'd question its quality?
At what price would the product be a bargain — a great deal?
At what price would the product start to seem expensive — you'd have to think twice?
At what price would the product be too expensive — you'd never consider buying it?
Midpoint between 'too cheap' and 'too expensive.' This is where resistance is minimised.
Between 'bargain' and 'getting expensive.' Your price should fall within this range.
3. Pricing Tier Design
Stripped-down version for price-sensitive buyers. What's included and what's the price?
The tier you want most people to buy. Anchor tier. What's the price?
Full-featured for power users or enterprises. Makes the standard tier look like a good deal.
4. Pricing Decision
What price will you set and why? Reference the data above.
How will you charge? Per user/month, per transaction, flat fee, usage-based, freemium.
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