Thread by @mijustin

While reading @chriscoyier's blog, I had a thought about "value-based pricing."

Many products provide enormous value (like felt pads for your chairs) but aren't priced accordingly.

Why?

Because (ultimately) it's customers who ascribe a value to your product. They decide.

Often, founders try to impose a price based on how much value *they* think their product provides.

(Much of the "value-based pricing" movement was focused on creators "charging what they're worth.")

But that's backward.

Ultimately, it's "what is the customer willing to pay?"

"The price of a thing" is determined by a variety of factors, including:

- costs
- supply
- demand
- branding
- competition
- gatekeepers
- govt regulation
- perceived value by customer

Quality, by itself, is rarely enough to increase a product's price by 5x.

In the mind of the consumer, "5x better quality" might only be worth "1.5x higher price."

Or, it might not be worth any price increase to them!

If people are used to paying $19/month for a thing, you can't just magically sprinkle "value-based pricing" on it, and expect them to pay $99.

Even if your quality is better!

We should be paying more attention to "brand-based pricing."

In most cases, it's your brand that allows you to charge more.

A good brand can change the perceived value of a product.

🎯 @chrislema nails it here:

"At the end of the day, a customer defines the value. And your job is to do the hard work to figure out where that value sits."