Pricing on value
In one sentence
Set prices by what your product is worth to the customer, not just what it costs you.
The simple version
Cost-plus pricing (cost + a bit) leaves money on the table. Value-based pricing asks: how much money, time or stress does this save the customer? You charge a fair share of that value. Raising value lets you raise price.
- 1Your cost
- 2Competitor prices
- 3Your price
- 4Value to customer
Why it matters
Price is the fastest lever on profit. Underpricing is one of the most common founder mistakes.
How to do it
- 1Estimate the value to the customer (money saved/earned, time saved).
- 2Look at their alternatives and what those cost.
- 3Price at a fair slice of the value.
- 4Offer tiers (good / better / best).
- 5Test higher prices with new customers.
Real-world example
Software that saves an accountant 10 hours a month (worth ~£400) can charge £79/month even if it costs £5 to run.
What the books say
Make the offer better, not cheaper — increase value until the price feels small.
Value-based pricing charges according to how much the offer is worth to the buyer.
Common mistakes
- Pricing based on competitors only.
- Being scared to raise prices.
- Too many plans that confuse buyers.
Questions people ask
Should I start cheap to win customers?
Usually not. Cheap customers can be the hardest to serve, and raising prices later is painful.
References
- [1]
- [2]
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