Recently, we have been tasked with determining the price of the product and/or service that our hypothetical business sells. Now initially, I thought this task would have a straightforward approach: determine the price of materials and production, factor in research and marketing, add a little bit for profit, then round the number to the nearest $5 or $10 and call it a day. This was, as I had wrongly assumed, the standard procedure for pricing a hardware product. It seems like the "fair" and "logical" way to go about it. At this point I will provide a brief reminder that my product is a piece of hardware (potentially with accompanying software) that plugs into a synthesizer (a.k.a. electronic piano) and provides, with its various knobs and sliders, an extra degree of control to the user.
I had assumed the aforementioned method of pricing until our teacher, Andrew Fry, told us a story about how a company he owned had increased the price of a piece of software tenfold so that corporations would take it seriously; not viewing it as cheap and sub-industrial. The surprising part of this story was that this tactic actually worked. It led me back to a conclusion that I had been led to working at a small retail business this past few years: a product is worth as much as people will pay for it.
This leaves me to make a decision. As Andrew Fry had stated, pricing a product is a combination of laser precise marketing science and wild, un-addled voodoo. Find the magic number that makes you the most money. On the other hand, my personal convictions do steer me towards creating a quality product and charging a fair and reasonable price for it. Looking at similar items in the market, I could imagine that my product would land in the range of $50-$200 depending on quality of materials, number of dials, etc. While I want to deliver a product with quality and affordability, I cannot have my cake and eat it. This leads me to the conclusion that I want to deliver my product in two tiers: a bare bones model priced at $50-$75 that contains a reasonable amount of hardware at a good price. This model would likely use lower quality materials in order to meet the price point, built to perform the core functionalities of the idea without any frills. I would then have a "pro" model priced at $125-$175 that is designed with quality materials, genuinely built to last, doesn't skimp on cool features, and contains enough hardware to satisfy any tinkerer. This would satisfy two distinct classes of customers. Since my product is easily replicable, I feel like I would have to keep prices competitive in order to lower the chance that another company swoops in and builds something similar for less. That being said, I am excited to learn about patent laws from our next guest speaker; being able to patent my idea and be the exclusive producer of such a product may change the game for me, so to speak.
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