October Innovation Capsule: 3 Steps for Developing a Winning Pricing Strategy


By Julie Jung

Every entrepreneur knows the importance of selecting a sensible price for their product. But how does one decide on that price?

3 Key Tips for Developing a Winning Price Strategy:

1. Price is the ultimate source of revenue- everything else is a leakage

Price is often described as the tip of an iceberg, being the most visible item in a transaction but a consumer may be paying more in reality. Entrepreneurs often fear increasing prices in fear of losing consumers. In reality, increasing the price by 1% without changing demand has led to tremendous gains for U.S. corporations. Reduction in all other costs allows room for more leftover- given that the quality of a product does not downgrade. Contrary to popular belief, customer volume and price growth can happen simultaneously when emphasis is placed on target value consumers during the process.

2. Pricing takes the least amount of time planning even though maximum possible efficiency gains can come from prices!

Many startups make the mistake of miscalculating the initial price of their product. So REALLY designate more time revising and analyzing the optimum possible gains when starting a business.

3. Utilize the Economic Value (TEV) Approach

Classic Tactical Pricing Orientations can be broadly categorized as Cost Driven Pricing, Competition Driven Pricing, and Customer Driven Pricing. While these methods each have individual advantages, Rao recommends the Economic Value Approach. This approach is completely profit driven. The willingness of a consumer to pay is the equivalent of price. Somewhere between the cost and the value is the price. You can utilize calculating tools available in the market to help come to a true estimate.

Key Insights derived from HKEC’s Ignite Startup Workshop: Develop a Winning Price Strategy with Raghunath Rao (4/12/2021)

As a marketing expert, Rao walked us through the strategies and importance behind coming up with strategies for maximum possible efficiency gains through financial implications for price change using applicable examples. Furthermore, Professor Rao recommends these resources to any non-business major entrepreneurs wanting to enhance their business knowledge: Harvard Business School Modules & Power Pricing by Dolan and Simon.

To see the full recording of this Ignite Startup Workshop, visit this link.

For news and information on future events like this, please visit the HKEC site here.

*For news and information on future events like this, please visit the HKEC site here.



Herb Kelleher Entrepreneurship Center

At HKEC, we’re all about igniting world changing ideas and preparing UT Austin student founders with the tools for startup success. herbkellehercenter.com