{"id":6121,"date":"2014-03-14T14:00:00","date_gmt":"2014-03-14T18:00:00","guid":{"rendered":"https:\/\/www.wework.com\/creator\/?p=5409"},"modified":"2020-04-03T18:01:19","modified_gmt":"2020-04-03T22:01:19","slug":"3-key-strategies-pricing-product","status":"publish","type":"post","link":"https:\/\/www.wework.com\/ideas\/professional-development\/3-key-strategies-pricing-product","title":{"rendered":"Three key strategies for pricing your product"},"content":{"rendered":"
\n

When we first launched Ministry of Supply, we sold our Apollo shirt for a whopping $128. Our price for the shirt then moved down to $88, back up to $108 and finally landed on $98.<\/p>\n

During all of these changes, we talked to our customers a lot about pricing. We watched conversion rate, listened to what our customers said, asked them what else was in their closet, and thought about the value our shirts give our customers: no more dry cleaning, lots of durability and a shirt for every occasion. Mostly, we debated about how all these factors should influence how we priced our clothing.<\/p>\n

We get a lot of questions on pricing from fellow entrepreneurs. How\u2019d we decide to sell our Apollo shirt for $98? What\u2019d we do to test what prices are right? And, how should costs play into pricing analysis?<\/p>\n

Given that my co-founder Aman and I were students at MIT Sloan when we launched Ministry of Supply, pricing was a topic that we talked to our professors a lot about. In the end, there were three main things we kept in mind when figuring out pricing:<\/p>\n

    \n
  1. Understand your customer\u2019s willingness to pay.\u00a0<\/strong>In pricing class, we learned that 80 percent of managers know how much it cost to produce their product, but only 23 percent know their customers\u2019 willingness to pay. As a customer-centric company, we wanted to understand everything about our customers, including how much they value our products, and what prices made our customers happiest. To do this, we tested pricing a lot, and, analyzed quantitative data such as conversion rate (given different prices), as well as\u00a0qualitative data, such as their sentiment after we followed up with them for feedback.<\/li>\n
  2. Think of the 3 C\u2019s in tandem: cost, customer, competition.\u00a0<\/strong>\u00a0None of these individually should cause you to dictate price, but rather, they should form a comprehensive view that allows you to triangulate the price. We viewed our pricing strategy through these three lenses as we adjusted our pricing: we knew what our costs were, we developed an understanding of who our customer was (what does he usually pay for a shirt? Is he price-sensitive?), and we understood our competition\u2019s pricing. However, rather than letting one of these factors dictate our price, we used all three to inform our final decision.<\/li>\n
  3. Don\u2019t set prices based purely on cost.\u00a0<\/strong>As any startup knows, costs depend on sales volume. Sales volume depend on prices. Because your costs will change as you scale, pricing based on cost alone is a dangerous practice. But pricing based on cost also ignores something important, which is the\u00a0value<\/em>\u00a0you create for customers. Think about it: had Pet Rock been priced on cost alone, a lot of money would have been left on the table.<\/li>\n<\/ol>\n

    In short, pricing takes a lot of understanding \u2014 and a lot of testing. \u00a0At MoS, we tested prices constantly before settling on the price that was best for us.<\/p>\n

    Remember: if people are complaining that prices are too high, that tells you something. Conversely, if nobody is complaining about your price, then it\u2019s likely too low.<\/p>\n

    As for why all of of our prices end with an \u20198\u2032? Because it\u2019s a lucky number and looks nice.\u00a0Hey, not everything is a science \u2013 even if you are a business school student.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    When we first launched Ministry of Supply, we sold our Apollo shirt for a whopping $128. Our price for the shirt then moved down to $88, back up to $108 and finally landed on $98. During all of these changes, we talked to our customers a lot about pricing. We watched conversion rate, listened to […]<\/p>\n","protected":false},"author":1047,"featured_media":34397,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[43902],"tags":[],"class_list":["post-6121","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-professional-development"],"acf":[],"yoast_head":"\nThree key strategies for pricing your product<\/title>\n<meta name=\"description\" content=\"When we first launched Ministry of Supply, we sold our Apollo shirt for a whopping $128. 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