The Science of Marketing

Setting price in the high tech marketplace, where solutions are new and value is not clear, is always a challenge. And I’m often asked, "how should we price this thing?" Well, I have to admit that I am far from being a leading expert in this area. But, I have had the opportunity to work with some very good product and financial managers who are experts. So, I asked them. Below are some snippets of what (I think) I heard, most of which were advice on how to get to pricing.

To be clear, I’m not talking about consumer products here. These people work in high volumes, sell to a multitude of consumers, and probably live and die thinking about pricing. I’m talking about high tech B2B, where the sales cycles are long, the customers are usually few and the price tags are always large.

Market Position

• If you are not the best, you have to be the lowest priced.
• You can get a 5% premium if you are the best with not more than three or four competitors.
• If you are trying to break into a new market, you probably have to undercut the competition or "give away the handle to sell the blade".

Competitive Offerings

• Know what your competitors are pricing for similar features and functionality. (Note: often times I hear "we have no direct competition", so think of competition as who loses if you win.)

Deal Analysis

• Always review each lost deal to see if you lost on price.
• Always review each won deal to see if you won too easily.

Value Selling

• In high tech oligopsonies (for all you MBAs), it is critical to build relationships at all levels (see Buying Cycle: In Their Shoes) in order to sell value to individual stakeholders.
• And above all, sell on value rather than cost plus. This means that you have to work hard at articulating and testing your value proposition (and constantly repeat the process).

So, there is no clear answers when pricing game-changing technologies, products and services, but rather different methods and processes of navigating the waters.

Do you agree or disagree with any of this advice? Can you share something that worked for you?

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