Taken by Mayank Kumar, Co-Founder and MD, UpGrad

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Introduction to the
Company
Live Q&A Session with Mayank Kumar
Co-Founder, MD, UpGrad

2. Page -2-
Agenda for the session
Introduction to Pricing1
Open Q&A4
Pricing Strategies2
Do’s and Don’ts3

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Why is pricing important?
Pricing
Revenue
Market Position
Services
Provided
Buying Decision
Marketing and
Sales
Distribution
Channels

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Traditional economics for price determination
Demand Curve
$10
$50
$100
200 75 20 200 75 20
$50*75
$3750
$2000
$100*20$10*200
$2000
Revenue Curve
Choose Price which gives
Maximum Revenue!
Pricing is not MATH

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Introduction to Pricing1
Open Q&A4
Pricing Strategies2
Do’s and Don’ts3
Pricing Strategies2
Introduction to Pricing1
Agenda for the session

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Cost Plus Pricing
Cost-Plus
• Simplest pricing technique
• Calculate cost of producing/delivering your product/service
• Apply % markup to earn target rate of return

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Value Based Pricing
1. Identify different types of customers and
understand behaviours separately:
• Lowest Priced Product Buyers
• Value Buyers
• Loyal Premium Buyers
Customer Segmentation
1. Do some methodical customer surveys
• Eg: Van Westendorp’s Price Sensitivity Meter:
• A direct approach for pricing research
• Assumption: Customers have some idea of
value of product
• For details refer to: Van Westendorp Technique
for Pricing Research
Insights into Customer Preferences Perceived Value of Product/Service
1. Perceived Value – The value that customers
think your product delivers
2. Increase perceived value through:
• Better marketing
• Give a value relative to another product
• Price Decoy

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Competitive Pricing
1. Charging a price that is comparable to what competitors are selling the same item for
2. There is little to distinguish among the products offered by competitors
3. Prices are generally set by market leader and other follow by matching these prices or offer at
comparable prices

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Comparison for Pricing Strategies
Pros
• Easy to
calculate
• Useful when info
on demand is
unavailable
Cons
• Does not take
demand into
account
• No way to
determine if
customers will
buy at set price
Cost Plus
Useful when selling tangible
products such as phones,
clothes etc.
Useful when selling services
Pros
• It is fairly simple
and requires
little research
• It is low risk and
can be fairly
accurate
Competitive Pricing
Cons
• It might lead to
large missed
opportunities
• It assumes that
competitors
have identified
the correct price
Useful for every business
Cons
• Competition
may lower
prices and
capture more
market share
• Less useful
when pricing for
budget
customers
Value Based
Pros
• Based on clear
understanding
of customers
and their needs

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Tips on Pricing – Use to validate your price points
Industry
Metrics
Benchmarking
• Gross Margin which is
Revenue – Service
Cost
• CAC and LTC. As
industry practice: LTV
~ 3*CAC
Break Even
Point
• Break even – point
when total revenues
equals total
expenditure
• Check whether price
point(s) make for a
feasible break-even
point
Sales and
Customer
Acquisition
• Run small marketing
campaigns
• Check how different
price points affect
acquisition
A/B Testing on
Price
• Don’t offer the same
product at different
prices
• Check for price
sensitivity – change
services or product
features and check
conversions

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Pricing Options for Startups
From Pricing
Strategies to
Pricing
Options
Pay Per
Usage
Dynamic
Pricing
Commission
Ads
Freemium
Subscription

12. Page -12-
Introduction to Pricing1
Open Q&A4
Pricing Strategies2
Do’s and Don’ts3
Pricing Strategies2
Introduction to Pricing1
Agenda for the session
Do’s and Don’ts3
Pricing Strategies2

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Do’s and Dont’s Pricing
1. Research optimal price
2. Pricing is a continuous process
3. Understand your customers
4. Use pricing tactics like discounts
5. Take cash flow into account
Do’s Don’ts
1. Set it and forget it
2. Cut prices drastically to sell more
3. Overestimate LTV
4. Underestimate cost structure
5. Give discounts that aren’t limited in time

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Agenda for the session
Introduction to Pricing1
Open Q&A3
Pricing Strategies3
Different ways of Pricing2

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Open Q&A
Write Your Queries in the Chat Window