Pricing Strategies for Deep Tech Startups

Pricing strategies are one of the most underdeveloped levers in driving your business to success. That is especially true for first-time tech founders working on their disruptive Deep Tech product.

Marketing in Deep Tech companies is often disregarded and neglected. In a product-centric entrepreneurial culture, most technical founders have very little know-how, experience and love for the art of marketing — often because it is misunderstood as being just another word for advertising… and we all know how annoying advertising can be…

In this blog article, I summarize Speedinvest Pirates’ main insights into pricing and, on top of that, in our podcast at the end you can listen to the full discussion between myself, Jennifer, and Gerald from our Deep Tech Webinar on pricing strategies.

Factors Influencing Pricing

In marketing, there is often a conversation around the 4Ps: product, promotion, place… and pricing. Think of these as variables in a formula for a successful marketing strategy.

There are many factors that can influence the pricing of a product which shouldn’t be underestimated by founders. It is not always about a simple margin on top of the plain cost of goods. The competitive landscape, current market conditions, a potential revenue target, target customers, and positioning of the company are all crucial factors when it comes to pricing strategies.

Value = “pretium” = Price

In ancient times, the Latin word for price was “pretium”. At the same time, the Latin word for value was “pretium”, too! It is crucial today to take perceived value into account when determining your price. This further supports the importance of knowing as much as possible about the fundamentals of your customer’s business model. The closer you can tie your pricing strategy to the productivity model of your customer, the bigger is your value potential.

The Human Factor

Although many Deep Tech products might be sold in a B2B environment, do not underestimate the psychological effects in pricing. There will always be a human being driven by their emotions making the decision on the other side.

The Forgotten Component?

We work and change our products all the time. But when it comes to pricing we tend to shy away from thinking about a change in our models and strategies. Nonetheless:

If you picked your price once and never changed it, it’s probably wrong.
‍
— Phil Libin, CEO Evernote

When you work on your pricing, make sure that you are consistent and think about a cost-plus, value-based, competitive or dynamic pricing strategy. Don’t forget to consider the impact of such a strategy on the process of your product development. Take this as an example:

One mistake we commonly observe from founders is that, when sales are slow, the first thing they do is cut prices. However, more often the devil is in the gap between your price and an unsustainably low perceived value of your product. So let me come to my final conclusions and recommendations:

• Increase the perceived value — Focus on the gap between your price and how much value customers think it delivers.
• Know your customers — Customers don’t perceive the value of a product or service the same way you do, as the founder. Understanding this helps you to find the right price.
• Let your price tell a story — Price can serve as a proxy for quality. Use that in building a pricing structure.
• Design for snap judgments — The decision to buy something is a split second one. Humans are ruled by emotions. Make use of that.
• Look at the competition — Thoroughly analyze existing competitive products or substitute products.
  

But, this is not the end, folks! In our podcast below:

• Gerald talks about Bitmovin’s long way to price their Deep Tech product from minute 22:30
• Jennifer introduces you to her best pricing practices from her consulting work at Untapped from minute 34:00
• And there’s much more!

‍

Interested in a detailed guide about startup metrics in any industry and situation? Get a free copy of the ultimate guide to startup metrics written by Speedinvest Pirates.

Learn more about the Speedinvest Deep Tech team and sign up for our newsletters to get our exclusive content delivered straight to your inbox.