How to be entrepreneurial in writing for customers, even if you're not in a startup
Ways to protect your price when negotiating a sale

Why we can't think our way through a pricing challenge--we have to experiment

While I find it easy to remember that pricing is part of the product, I forget that you probably can't reach the correct price without some experimentation. So the best way is to produce various configurations of the product and see which one appeals to your target audience. 

It is impossible to demonstrate the value of your product without a clear communication of its price. 

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Fluxx Studio Notes: The first rule of pricing is: you do not talk about pricing, 2016-Apr-18 by Tom Whitwell 

[Whitwell's excerpts have been slightly edited and emphasized to make them easier to read. The full article is highly recommended.]

  1. It's tempting to talk to customers about price. Your customers—real or potential—will certainly have views about prices that they are keen to share. Ignore them. 

  2. As human beings find it almost impossible to think rationally around pricing. Because of this, as human beings, our own thoughts about pricing are likely to be almost useless.

  3. Experiments are the only way to make sense of it all.

Price is the crudest, and most subtle, message you can send about your product, so it’s worth getting it right.

Whitwell also points to this excellent blog post about pricing:

LeanBlogs: Why You Should Never Ask Customers What They'll Pay, 2013-Sep-10 by Ash Maurya

Principle 1: Pricing is Part of the Product
Suppose I place two bottles of water in front of you and tell you that one is $0.50 and the other $2.00. Despite the fact, that you wouldn’t be able to tell them apart in a blind taste test (same enough product), you might be inclined to believe (or at least wonder) whether the more expensive water is of higher quality.

Here, the price can change your perception of the product.

Principle 2: Pricing Determines Your Customers
Pricing doesn’t just define the product but also your customers. Building on the bottled water example, we know there are viable markets at both price points. The bottle you end up picking defines the customer segment you fall in.

Principle 3: Pricing is Relative
In their seminal book on Positioning – The Battle for the Mind, Al Ries and Jack Trout describe the concept of a product ladder which is how customers organize products into a mental hierarchy. Your job is understanding what alternative products occupy the top 3 spots in their mind. These alternatives provide reference price anchors against which your offering will be measured.

Alternatives can be real or extrapolated. In both cases, they help when applying the relativity principle.

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