Many businesses launching a new product or service struggle to determine what they should charge. In reality, the market will set the price for you, but there are some proactive things you can do.
To narrow down your price range and reduce the anxiety of price setting:
- Research direct competitors. Find three companies in your geographical location and identify a few of their clients. If you are seeking government contracts, you can request the bids of competitors. For private proposals, scour your network for their clients and reach out to them.
- Research indirect competitors (companies that provide your product/service as a value-add to their core competence).
- Identify similar business models.
- Speak with potential clients about what they want to pay. This is self explanatory and is the best way to determine price.
For your “first few” clients, however, this research apply doesn’t apply at all.
Your number one objective when starting a new business or launching a new product/service is to get the first few clients and build momentum.
Your first few clients are your most critical. These cherished and chosen few are meant to prime the pump, and a different approach applies to them. They give you more bandwidth to make mistakes. They can provide powerful testimonials. They validate your value proposition. And they will become a great referral network.
So the question is, what should you charge the first few? The answer is, whatever they are willing to pay (as long as it does not bankrupt you)! They pay $X and you ask for:
- A reference letter regarding your company and your product/service
- Introductions to 3-5 prospective clients
- Use of their logo on your site and in sales presentations
After you get your first few on board, your sense of what to charge will be much clearer. And no matter if it’s your long-term, product launch, or startup pricing, the market will let you know what it’s willing to pay!
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