Startups should  have a set of prospects that have validated the product concept with. If you do not have a prospect base that has confirmed that your concept makes sense, go build that before worrying about product or product pricing.

The prospect base would later become the first set or alpha users of your product (once it is ready).

This is the user base that you should interview and discuss with them

• What they are willing to pay for this product?


• Which features would they expect for free?


• Which features would they pay a premium for?


• What is the pricing model (recurring, one-time, revenue sharing etc)?

The other alternative model that you can use is cost plus, determine all your anticipated cost and the potential demand  for your product to calculate the product price. The problem with this is it just a bunch of assumptions and can lead to the wrong pricing model. Even if you use this model you will eventually have to review it with your prospect base to see if they are willing to pay for this product/service.

If the product is highly customized for a niche market you can use value based pricing in which you determine the value that you are adding (or the cost of the pain point that you are resolving) and price the product inline with that value.

About the Author:

Along with a well published blogger (regularly featured onAlltop, Entrepreneur Community Online etc) Pooja specializes in developing marketing strategies for startups. You can follow me on Twitter and you can email questions at pooja {at} blueknee {dot} com. You can also join the Linkedin group "Marketing for Startups" at http://linkd.in/ihNJmR.