Pricing products

Pricing is one of the topics on which is hard to find clear and transparent discussions. Something I have noticed with scipreneurs is that they are normally shy to ask for money. They don't think others will value their work, or they under estimate how much people will benefit from their products.

Pricing is hard. You are free to set whatever price you want for whatever thing you produce. That is call the pricing uncertainty principle. However, you need to remember there's a business behind the making of a product (five elements that make a business), and there may be some guidelines on how to put a price:

• COGS-based pricing. Calculate how much it costs to build and add a margin that satisfies you. Now, be careful, that this is beyond the "bill of materials". You factor in the labor associated with building and delivering.
• Comparing to other market offering, check what your competition charges and price it somewhat similarly. If not done carefully, this can lead to a race to the bottom, a situation in which you don't want to find yourself with bigger players.
• Discounted cash flow, meaning the total value it brings over time. This is handy for services, for example, but also to pricing a startup (assuming it has revenue).
• Value-based selling, meaning checking what is the value to the customer. Sometimes it can be a hard metric, like how much money they'll save, sometimes it is emotional (this is a unique piece of art). This closely relates to jobs theory, since the purpose is to identify aspects that are under-served or highly valuable to the customer.