Pricing Strategy: How to Price Your Product for Maximum Profit
Pricing Strategy: How to Price Your Product for Maximum Profit
You're leaving money on the table.
Most companies underprice their products because:
Here's how to price for profit.
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The 3 Pricing Strategies
1. Cost-Plus Pricing
Formula: Cost + Markup = Price
Product costs ₹10,000 to deliver → Add 50% markup → Price = ₹15,000
Pros: Simple, ensures profit
Cons: Ignores customer value
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2. Competitor-Based Pricing
Formula: Match or undercut competitor prices
Competitor charges ₹20,000 → You charge ₹18,000
Pros: Easy to position
Cons: Race to the bottom
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3. Value-Based Pricing (RECOMMENDED)
Formula: Price based on the value you deliver
You save clients ₹5 lakh/year → Charge ₹1 lakh (20% of value)
Pros: Maximizes profit, aligns with customer ROI
Cons: Requires deep customer understanding
Bottom line: Use value-based pricing whenever possible.
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How to Implement Value-Based Pricing
Step 1: Quantify the Value You Deliver
What does your product/service actually do for customers?
Interview 5 customers. Ask: "What's the biggest benefit you've seen from using our product?"
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Step 2: Calculate Customer ROI
Formula: (Value Delivered - Price) ÷ Price × 100
If your ROI is 3x or higher → you can probably raise prices.
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Step 3: Segment by Willingness to Pay
Not all customers value your product equally.
Why this works: Captures more value from high-WTP customers without losing low-WTP customers.
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Step 4: Test and Iterate
Pricing isn't set in stone.
Optimize based on results.
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Pricing Psychology Tricks
Trick 1: Anchor High
Show the most expensive option first.
Why it works: Makes the middle option feel like a deal.
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Trick 2: Charm Pricing
End prices in 9 or 7.
₹19,999 feels cheaper than ₹20,000.
Why it works: Psychological perception.
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Trick 3: Decoy Pricing
Add a decoy option to make your target price more attractive.
Most people pick Pro because Pro+ feels like a bad deal.
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Trick 4: Bundle for Perceived Value
Sell packages instead of individual items.
Instead of:
Offer:
Why it works: Higher AOV, better perceived value.
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When to Raise Prices
Most companies wait too long to raise prices.
✅ You're consistently closing >50% of deals
✅ Customer demand is high
✅ You've added new features/value
✅ Your costs have increased
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How to Handle "You're Too Expensive"
Response 1: Reframe Around Value
"I understand. Let me ask—if we could save you ₹5 lakh per year, would ₹1 lakh feel like a fair investment?"
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Response 2: Compare to Cost of Inaction
"What's the cost of NOT solving this problem?"
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Response 3: Offer a Different Tier
"Our Growth plan might be a better fit. It's ₹15k/month and includes [features]."
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Response 4: Walk Away
Sometimes, they're just not the right fit.
"I totally understand budget constraints. If anything changes, feel free to reach out."
Don't discount just to close a deal.
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Pricing Mistakes to Avoid
Mistake 1: Competing on Price
Price wars = race to the bottom.
Compete on value instead.
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Mistake 2: Underpricing to "Get Customers"
Low prices attract low-quality customers.
They'll churn the moment someone cheaper comes along.
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Mistake 3: Complex Pricing
If prospects can't understand your pricing → they won't buy.
Keep it simple.
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Mistake 4: No Price Increases
Costs go up. Value increases. Prices should too.
Review pricing annually.
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Pricing Models to Consider
1. Subscription (MRR/ARR)
Best for: SaaS, ongoing services
Example: ₹10,000/month
Pros: Predictable revenue
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2. Usage-Based
Best for: API, cloud services
Example: ₹1,000 per 1,000 API calls
Pros: Scales with customer growth
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3. One-Time Fee
Best for: Consulting, projects
Example: ₹5,00,000 for a 3-month project
Pros: Upfront cash flow
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4. Freemium
Best for: High-volume products
Example: Free basic plan, ₹20k/month for premium
Pros: Low barrier to entry
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Pricing Strategy Checklist
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The Bottom Line
Pricing isn't just about covering costs.
It's about capturing the value you create.
1. Price based on value, not cost
2. Segment by willingness to pay
3. Test and iterate
4. Don't be afraid to raise prices
Do this right, and you'll maximize profit without losing customers.
Need help defining your pricing strategy? Let's talk.