How Much is Your Solution Really Worth To Your Customers?

I want to talk about pricing your products or services. We all talk about the amazing journey towards its innovation, how many lives we will impact and the tie we will wear when we ring the bell on Wall st. — but before all that you have to understand Rule №1 of the free market,

How much is your ideal customer willing to invest in you, and which customer are you really trying to attract.

Don’t have time to read the article? Watch it on youtube instead.

https://youtu.be/mCJ_oD74-G0

Along this path, I understood the power that pricing plays in positioning your solution — right in the decision making mind space of your customer. And healthcare is no different than any other commodity.

I experimented with different price points and I saw a trend in the character, calibre and even the motivations of those who started to become less price-sensitive, even during this pandemic.

So now I keep asking aspiring healthcare entrepreneurs, who is your customer and what price will attract them to you?

Pricing goes beyond basic accounting and financial modelling. We know of cost plus pricing where you put a number that represents how much money it took to source the raw materials, advertising, manufacturing and maybe legal fees — but that is a rigid way of becoming sustainable, never mind competing with other players in your market.

I propose 3 specific concepts that can start the narrative on pricing for progress and profitability. Mind you there’s a lot involved here and I don’t think we have time for an entire health economics lesson, nor am I qualified to speak about it — but I can discuss these points as a practical and frugal entrepreneur.

Positioning yourself

I believe in specialized professional niches, like digital health, you have to consider value-based pricing to properly position your solution away from the competitors — like a blue ocean strategy.

Something to stand out and make your prospect think why is it priced that way? Is the company crazy or do they actually have something better and more valuable to me?

Price for Progress

You can’t be planning for progress, if you are stuck at the same price and are obsessed with increasing your customer base. That just increases your burn rate, the costs of acquiring new customers increase exponentially.

What you need to do is to figure out how can I provide even better quality and value and justify it with a different pricing tier — sure many will leave but think of it this way, they were never your customers, they were with you because of a discount or promo code.

Customers who are still with you are now value centred and loyal to your brand.

Fund Your Own R&D

You need to fund your own R&D. You need the resources to fund your next iteration — businesses fail because they couldn’t adapt to new market changes — as we have seen with this ‘Black Swan Event’ of 2020.

You can’t waste time and money on satisfying lower tiered customers — who are just one step away from moving elsewhere.

By pricing well (not just pricing high) you can plan ahead on reinvesting your projected income towards improving your solution. And it decreases your tax obligations since you’re reinvesting income back into your company. The IRS and your future shareholders will agree with me on this.

Closing Thoughts

Do you think you are pricing your solution way too low?

Maybe it’s time to open up an excel worksheet and consult with a financial planner.

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