Sales
Pricing Strategy Calculator
Find the price corridor between your costs, your competitors and the value to the customer, and see what a price change does to your volume and profit.
- Time: 15 to 30 min
- With: Founders, product owners, sales and finance
- You get: A price corridor, a tested price change and a written pricing rationale
How to use this worksheet
- Enter your cost per unit and your current price. Add a target margin to get the cost-plus price, which is your floor.
- Add the lowest and highest competitor price and what the product is worth to the customer. These set the corridor around your price.
- Add your volume and fixed costs to see contribution and profit. Set a price sensitivity if you have a rough idea (0 = buyers ignore price, 2 = very sensitive).
- Read the table: it shows for each price change how much volume you need to earn the same margin, and with sensitivity the expected contribution.
- Pick a strategy, write down why, and decide how you will test the price before you roll it out.
Costs, price and market
Use the same period for volume and fixed costs.
Which approach fits your situation, and why?
Prompts and example
Ask yourself
- Cost-plus: simple, but ignores what customers would pay. Is it only your floor?
- Competitive: do you match, undercut or price above the market, and what justifies it?
- Value-based: can you show the customer a number that proves your value?
- Penetration or skimming: do you start low to win share or high to earn early margin?
- Tiers: would good, better and best versions let different customers pay different prices?
Example
Value-based with three tiers. The middle tier is priced at EUR 10, about 60% of the value we create for the customer.
Do not roll out a new price blindly.
Prompts and example
Ask yourself
- Which group sees the new price first?
- What result tells you the price works (conversion, volume, churn)?
- When do you decide?
Example
New price for new customers only for 4 weeks. Keep it if conversion drops by less than 10%.
Write down where the numbers come from and what would change them.
Prompts and example
Example
Cost per unit from the March supplier invoice.
Price corridor and price change
Before you finish
- Cost per unit contains all variable costs (materials, shipping, payment fees, support).
- Competitor prices are for comparable offers, not the cheapest alternative on the market.
- The customer value is based on a number the customer would agree with, not on your hope.
- The price sensitivity is an estimate you plan to test.
How to read the result
A price has three limits. Costs set the floor: below them every sale loses money. Competitors set the reference: customers compare. Customer value sets the ceiling: above it no rational buyer pays. Your price should sit inside this corridor, and where exactly depends on how different you are.
The volume column answers a question every price change raises: how many more units do I need to sell to be as well off? If your margin is 40%, a 10% price cut needs about 33% more volume. A 10% increase can lose around 20% of your volume before you are worse off. Margins make small price changes bigger than they look.
The sensitivity figure is a simple linear estimate (units change by sensitivity times the percentage price change). It is good for comparing options, not for forecasting. Validate it with a price test or a willingness-to-pay survey.
Recommended reading
Werbung / Ad: Affiliate links. As an Amazon Associate I earn from qualifying purchases at no extra cost to you.
- Monetizing InnovationMadhavan Ramanujam & Georgia Tzaban
Design the product around what customers will pay, not the other way round.
- The Strategy and Tactics of PricingThomas Nagle, John Hogan & Joseph Zale
The standard guide to value-based pricing strategy.
- Pricing with ConfidenceReed Holden & Mark Burton
Ten ways to stop leaving money on the table.