Eva Dimitrova breaks down two pricing methods for startups. Cost-based pricing adds a fixed margin to production costs and stays competitive. Value-based pricing charges what customers think it's worth, yielding higher margins but demanding deeper market knowledge. Pick based on your goal: cost-based for fast growth, value-based for profit.
Pricing. This is a topic that's not very popular, I think, among startups, but there are two types of ways to price. How do you price your product or your service? The first one is cost-based. So you determine what your cost is to produce the service or to produce the product, and then you put a certain margin on it, you know, 10%, 20%, however you decide. Obviously, you have to align that with what the other prices of the competitors are, right? Because if your competitor is selling something so similar to you, but yours costs like double, this is not going to work. The second pricing strategy is called value-based, where you're trying to determine what value people put on your product. And so, This is a more difficult one, but it's also one that is more profitable, alright? Because then you actually have bigger margins. As a business, you're making more money when you sell a single item. And so which one shall you take? How should you decide? It depends on your objective. If your objective is to get market share first, this means you need to move fast, and this means the cheaper your product is, the faster you're gonna move. And so maybe in the beginning of your product, of your company, you might decide to opt for cost-based pricing strategy. But if you're— if you want to be profitable company and you don't really care whether you're gonna move quickly to get market share, then the way to go is to have value-based pricing because this is going to increase your profit.
