Michael Herold
April 18, 2018
11k

# What's in a price? How to price your products and services

So you have something new to sell: maybe your first book or a hip new SaaS. How do you decide the price? How do you know you're not overpricing? Or underpricing? Why, oh why, did you ever think to sell something?!

Instead of choosing a number by looking inward at your costs, you can use what programmers use best: an abstraction! You'll learn a model for picking the right price for your product and what that price communicates so you can confidently price your next great invention. You'll leave with an actionable list of next steps for pricing your future projects.

See the accompanying blog post at michaeljherold.com.

April 18, 2018

## Transcript

services
2. ### My name is Michael Herold. Please tweet me @mherold or

say [email protected].

price.

customers.

47. ### Pricing a granola bar Step Maximum 1 \$0.50 2 \$1.00

3 \$1.50 ... ... 20 \$10.00

52. ### At what price do you begin to think the product

is so inexpensive that you would question its quality?
53. ### At what price do you begin to think the product

is a great deal for the money?
54. ### At what price do you begin to think the product

is getting expensive, but you still might consider it?
55. ### At what price do you begin to think the product

is too expensive to even consider?

69. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
70. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.

73. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
74. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.

20 \$10.00

20 \$10.00
77. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...]
78. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
79. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
80. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...] scale.map { |x| cdf(x, observations: cheap) }
81. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...] def cdf(x, observations:) end scale.map { |x| cdf(x, observations: cheap) }
82. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
83. ### A function where the right-hand side is equal to the

probability that a random variable is less than or equal to x.
84. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...] def cdf(x, observations:) end scale.map { |x| cdf(x, observations: cheap) }
85. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...] def cdf(x, observations:) count = observations.select { |obs| obs <= x }.count end scale.map { |x| cdf(x, observations: cheap) }
86. ### cheap = [1.22, 9.99, 4.88, ...] scale = (0.5..10).step(0.5) #=>

[0.5, 1.0, 1.5 ...] def cdf(x, observations:) count = observations.select { |obs| obs <= x }.count count / observations.count.to_f end scale.map { |x| cdf(x, observations: cheap) }

leader.

103. ### These intersections are your points of marginal cheapness and marginal

expensiveness.

108. ### Pricing doesn't have to be about extracting maximum value out

of your customers.
109. ### Often, it works out better if you price for some

consumer surplus.

questions.

124. ### My name is Michael Herold. Please tweet me @mherold or

say [email protected].
125. ### Image Credits 1. Business Model icon by Thomas Knopp, from

the Noun Project. 2. Cricket by Ed Harrison, from the Noun Project. 3. Supply and Demand by Davo Sime, from the Noun Project. 4. Partnership by Vectors Market, from the Noun Project.
126. ### Reference Van Westendorp, P. (1976) "NSS - Price Sensitivity Meter

- A new approach to understanding consumer perception of price." Proceeedings of the ESOMAR Congress.