How to Price what you Sell?

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A guideline and reference for struggling entrepreneurs on how to price products/services that they sell!

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How to Price what you Sell?

  1. 1. Yoda, how do I price what I sell?
  2. 2. How to Price what you Sell? Alok Rodinhood Kejriwal Founder – 2win group & therodinhoods
  3. 3. Why? Why this PPT? I‟ve sold crazy s*** in the past 29 years. From infant socks to oil drums to LC (letter of credit) discounts to advergames to virtual cars in mobile games. In the process, I‟ve always been confronted with the question “How do I price this?!” I‟ve also come across zillions of newly minted entrepreneurs struggling with this tough question.
  4. 4. Wrong is the Question you Ask…
  5. 5. The wrong question! After deep reflection, I have realized that the Question itself is WRONG. Yup. Pricing doesn‟t matter. It‟s a „side effect‟, an „occurrence‟, a „consequence‟. In the next few slides, I shall explain why…
  6. 6. Exercise 1 Carefully study the next chart and THINK of products and services (not related) that fit in the (?) Boxes
  7. 7. Innovative ? ? High $$$ Low $ ? ? Ordinary
  8. 8. Need a nudge? If you didn‟t understand the chart, try this: - The Top Right Box (green) represents something that is High in $$$ (price) and Innovative - The Bottom Right Box (blue) represents something that is High in $$$ (price) and Ordinary - The Top Left Box (pink) represents something that is Low in $ (price) and Innovative - The Bottom Left Box (purple) represents something that is Low in $ and Ordinary
  9. 9. Now think of products and services that fit the chart. Once done, go the next slide where I reveal my choices.
  10. 10. Innovative Post-it Notes (3M) iPhone Low $ High $$$ Nothing Everything Ordinary
  11. 11. Exercise 2 Volume vs. Price
  12. 12. High Volume ? ? Low $ High $$$ ? ? Low Volume
  13. 13. High Volume Lays Chips Rare or Nothing Low $ High $$$ Anything RollsRoyce Low Volume
  14. 14. Exercise 3 Losses, Profits & Volume
  15. 15. High Volume ? ? Profits Losses ? ? Low Volume
  16. 16. High Volume e-Com Companies Coke Profits Losses Services firms Failed Startups Low Volume
  17. 17. Exercise 4 Impulsive vs. Informed Buys
  18. 18. High Volume ? ? Informed Impulsive ? ? Low Volume
  19. 19. High Volume Grocery iTunes Informed Impulsive Luxury Goods Airport Shopping Low Volume
  20. 20. Exercise 5 Volume vs. Competitors
  21. 21. High Volume ? ? Low competition High Competition ? ? Low Volume
  22. 22. High Volume Google Search Mobile Apps Low competition High Competition Pet Shops Bridal Services Low Volume
  23. 23. Relief! No more charts  (feel free to create your own exercises using more parameters)
  24. 24. Question What did you learn?
  25. 25. Analysis Let‟s examine the charts once again, grouped together:
  26. 26. Free to Unaffordable with Zero/Little Competition Free Low Price High Price Unaffordable Google Post-it notes iPhone Rolls-Royce No /Little Competition No /Little Competition No /Little Competition No /Little Competition
  27. 27. Irrational to High Price with Massive Competition Irrational (Free) Price Low Price Medium Price Flipkart Grocery Services: Firms like ad agencies/Hiring firms Lots of Competition Lots of Competition Lots of Competition High Luxury Goods (Watches) Lots of Competition
  28. 28. Now ask yourself, which of these Companies would YOU rather be?
  29. 29. Conclusion 1: Pricing doesn‟t matter  when You sell INNOVATION You sell PERFECTION You sell LEADERSHIP Google or Apple Rolls-Royce Post-it Notes/Amazon AWS Pricing DOESN’T matter Pricing DOESN’T matter Pricing DOESN’T matter
  30. 30. Conclusion 2: Pricing does matter  when: You sell what OTHERS sell You sell only to COMPETE You sell ONLY for VOLUME Services businesses Taxi services Grocery type stuff Pricing DOES matter Pricing DOES matter Pricing DOES matter
  31. 31. Meta Conclusion: Stay on the left. Price IS immaterial. High Price, High Volume Bose iPhone Low Competition High Bridal Services General Services Low Price, Low Volume High Price, Low Volume RollsRoyce Cartier Luxury Goods Zero Price, High Volume FB Google Competition Low Coke Lays iTunes Post-its High Duty Free Low Price, High Volume Mobile Apps Competition Low North Korea High Super famous paintings High Price, Zero Volume
  32. 32. What’s with the guys on the left who DON’T care about Price?! Google Apple Rolls-Royce Cartier • Unbeatable technology • Patents, IP • Perfection of product • Brand recognition (built over years)
  33. 33. What’s with the guys on the right who only care about price? • Me-too, competing on price • Marketing via personal contacts • Very people-dependent • Competing for small volumes • No guarantee of sustainability or profits Services Firms (ad agencies, recruitment services, etc.) Niche service providers (e.g. Bridal services)
  34. 34. Conclusion: • FREEDOM from pricing comes from Innovation, Perfection, Technology and Creating IP; NOT from clever Costing, cut throat Competition or gushing Volumes. • Service firms (e.g. Infosys, TCS, Wipro) have built Pricing POWER by mimicking great product companies. • Pricing is NOT about Cost + Profits. It’s about Delight + Uniqueness.
  35. 35. How to Price? Don’t think of cost & margins. Instead think of HOW you will be unique in your offering Constantly create IP. That will make you develop PRICING POWER Introduce INNOVATION, IRRESPECTIVE of whether you price it or not!! Keep delivering PERFECTION no matter how ordinary your sale. Perfection is a long term price ruler
  36. 36. Disclosures: • The principles and guidelines spoken about in this presentation are strictly my own ideas and MAY NOT be feasible/practical for you. • This document should serve as a guideline and reference - not as a rule book!
  37. 37. Liked this presentation? Go through some more! • Basic Funding Concepts for Entrepreneurs • How to write effective e-mail proposals • How to make an engaging PPT • PR for Startups – a reference guide!
  38. 38. Connect with me! e-mail - alok@rodinhood.com Facebook facebook.com/rodinhood Twitter - @rodinhood My social network for anyone enterprising! therodinhoods.com Presentations – www.slideshare.net/rodinhood

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