Question

Topic: Strategy

B2b Service Pricing

Posted by Anonymous on 3/20/2012 at 1:20 PM ET 250 Points
I'm currently facing a problem of pricing a completely new product/service. It's a testing platform for mobile applications. The developers go to the website and test their apps. I need to find a golden middle price, not too low so that I'll watch my possible profits fly by, not to high so that people would be willing to spend, essentially the one that'll generate highest profits.

Operations costs are very low, the thing is automated. Only initial costs are quite high: to develop a website and to buy the machinery (smartphones for testing), but we are looking for investors for that.

The piece of advice I'm looking for is how to determine that price? I can't refer to competitors because their products are kinda different and very expensive. I know mine should nowhere near those prices (it'll be cheaper), since I offer a little different kind of test. Quality is good and easily can be improved. Please, help me set the right prices, may be suggest different steps of how to do it, the things I should consider.
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RESPONSES

  • Posted on 3/21/2012 at 1:47 AM Author
    Thank you for your response! Let me give you a little bit more insight in our case

    It works this way. Assume you have an HTC smartphone and download an app, you run it and it doesn't work. Why? because probably it was tested on Samsung, manually by the developer. What we offer is testing the app on a big number of smartphones in order to minimize the number of cases such as described above. By the end of the test we send an error report for developer to work with. The service is not time consuming at all, they get the results in 30 min max.

    Are you saying we should somehow calculate how much it costs to the company to lose a customer who has problems with an app? It might be too tricky. See, we will need to know the price of an app, which varies from free to ridiculously high, how many people have a particular device, how many of them want to use the app, if the app is free, their costs are most probably related to ads they run through these apps and varies in mysterious ways, plus a customer can rate the app 1-star and this has an effect too, but on how many customers.. things like that I know we will have to do this if we don't find a good alternative method for determining our price. But do you have any other ideas?

    We also have some info on the market potential. we have stats like how many apps are there and how many are added each month, so we can tell how much we could earn, if say our price was 10, 20 or 30 per app and the demand was 100k or 150k apps.

    Hope this helped.
  • Posted on 3/21/2012 at 10:07 AM Accepted
    Your pricing strategy needs to start with an understanding of the value to the customer. Your cost has nothing to do with it.

    The super-fast turnaround time should carry a premium price. Those who really need fast turn-around will be willing to pay more.

    You don't need to tell everyone how fast and easy it is. Just sell them on the benefit, and set the price based on that.

    If you need more specific help with pricing strategy, it's probably worth paying for the expertise. There are experts on this forum who regularly consult on pricing and positioning issues. Just hire one of them for a small project. It will be well worth the investment.
  • Posted on 3/21/2012 at 12:13 PM Author
    I was hoping to see a confirmation. I really thought about value based pricing strategy but wasn't sure since I don't have much experience, I'm just an intern in this little company. Thanks for taking time and responding. I'll also propose to consider some consultant assistance. Thank you again!
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