Saturday, June 19, 2021

How to Experiment With Your Pricing Strategy at an Early Stage Startup?

June 11, 2021 by  
Filed under Business, Opinion, Tech/Internet, Weekly Columns

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( Pricing is an intricate and delicate factor that influences every part of business. It is a critical aspect of marketing, and it impacts your market position and determines your type of customers. Pricing constitutes one of the most core pillars of every business, and startups are not left out.

For early-stage startups, pricing is a complicated process that requires consistent evaluation and assessment. Evaluation and judgment are based on customer needs and behavior, market trends, product differentiation, and economic dynamics.

Pricing inconsistencies – overpricing, underpricing, or no pricing at all can lead to loss of customers, reduced sales and revenue, and sometimes, business failure. Identifying the ideal pricing strategy for your startup will increase sales and profits, promote customer satisfaction and retention and ultimately, lead to business growth.

As opposed to general belief, prices are not just numbers assigned to products or services. They reflect your business identity, your value for customers, understanding of market trends,  and in some cases, the value of your product/ service. This is why you must have a good knowledge of pricing and identify the right pricing strategy for your startup.

Pricing Strategy – What it means.

Pricing strategies are the methods or processes used by businesses to fix prices for their products or services. It is used to determine the price for each product or service based on specific influencing factors. Some common pricing strategies used by businesses include:

  • Cost-plus pricing
  • Economy pricing
  • Value-based pricing
  • Competitive pricing
  • Price skimming
  • Market Penetration pricing
  • Dynamic Pricing

Many startups tend to give more attention to every other operation and business activity except pricing to improve growth. However, some studies have shown that minute pricing variations can significantly affect revenue, considerably increasing or reducing it by up to 20-50%. But, only a few companies dedicate the necessary efforts or functions to pricing strategies or setting the right prices.

As a result, numerous businesses and companies miss opportunities to experience notable growth with little effort and fail to tap into their potential. Finding the right strategy and allocating the right prices to your products and services can increase business growth up to 7.5 times higher than customer acquisition.

Business Lessons 2021

Pricing Strategies that Startups Can Experiment

With the right pricing strategy, startup growth is bound to take a positive turn. 

There are several pricing strategies startups can adopt to price products/services. However, while experimenting, you may discover that some methods may work better for your startup while others may not. This ultimately depends on your customers, niche market, and the type of product/service being offered. Some common pricing strategies your startup can experiment with include:

  • Penetration pricing

Penetration pricing is a product pricing strategy that involves generating high demand, building a reliable customer base, and leveraging customer base loyalty.

Here, new products or services are introduced into an already existing market at a low price. This initial price is aimed at undercutting competitor brands, building a customer base, and attaining some level of growth. After gaining stability, the product or service price is finally increased to reflect the product value and increase revenue.

This strategy is influenced by various factors such as:

  • Price elasticity
  • Business’s ability to bear potential losses to gain some stability in the market
  • Price skimming

The price skimming strategy involves allocating reasonably high prices to newly introduced products and services, then lowering it over time. The prices of these products and services are usually reduced in a step-ladder fashion as competitors join the market.

Businesses usually use this product pricing strategy in emerging markets – that is, when a new type of product or service is introduced into the market.

Here, startups or companies can leverage on the early or first customers to regain production cost and extra revenue, then lower prices to remain competitive while attracting price-conscious customers.

This strategy allows businesses to make the most revenue from early adopters when product demand is high. It also allows them to remain in strong competition even when the prices have been lowered to meet the market demands. This is the direct opposite of penetration pricing.

  • Premium pricing

The premium pricing strategy is majorly used by businesses that develop and sell high-quality products and services to high-income earners. This pricing strategy is also referred to as “image or prestige pricing.”

This strategy is founded on creating a specific pricey perception of products or services of a brand based on price alone. Here, the price allocated to the products and services usually exceeds the standard market price in creating a perception that brings in more revenue. It is commonly seen among brands like Apple, Gucci, etc.

To achieve this pricing strategy, you will need to develop a psychological marketing strategy that offers a  luxury lifestyle appeal to your desired customers.

  • Bundle pricing

Bundle pricing involves selling a combination of several products together at a lesser price than they would have been if sold independently. Companies utilize this strategy when they want to sell a lot of inventory immediately.

In a successful bundle pricing strategy, the profits gained on low-value items outweigh and compensate for the losses procured on high-value items contained in the bundle.

  • Economy Pricing

Economy pricing is a product pricing strategy targeted at price-conscious customers who need good products or services to purchase. It is a volume-based pricing strategy where products with relatively low production costs are priced lowly, with revenue dependent on the number of sales made.

This strategy is dependent on your business’s overall cost and the value of the product or service.

How to Determine the Right Pricing Strategy for Your Business

Identifying your startup’s needs is key to choosing the right pricing strategy for your business. The right pricing strategy for your startup is highly dependent on the type of product, market niche, and competitor brand strategies. To determine a suitable pricing strategy for your business, here are a few practical steps you can take.

  • Find your value metrics.
  • Determine your target customer’s profile.
  • Carry out user research and pricing strategy experimentation.


Regardless of which product pricing strategy you choose for your startup, proper pricing of your inventory is critical for achieving consistent business success and growth.

Even with high-quality products or services, an effective team, and notable brand awareness, sales and revenue can drop dramatically if products are poorly priced.

Therefore, finding the right pricing strategy per product or service and running with it is essential.


Forbes: How To Price Your Early Stage Startup Product

MindTheProduct: Designing Pricing Strategies: Don’t Ask – Experiment!

ProfitWell: The Pricing Strategy Guide: Choosing Pricing Strategies That Grow (not sink) Your Business

USchamber: 5 Smart Pricing Strategies to Attract Customers

About AbstractOps

If you’re an early stage CEO, AbstractOps handles and automates your HR, finance, and legal ops — so that you don’t have to. We help you Be Scrappy, Not Sloppy.

We understand that ops can be painful. If you have any questions or need assistance with your ops, drop us a note at We’ll do our best to help.

Staff Writer; Bobby Jones

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