How to price your product based on quality versus the competition

Edited excerpt from Five Words Of Wisdom From SaaS Office Hours With Bill Macaitis (CMO of Slack, ex-CMO of Zendesk and ex-SVP Online Marketing of Salesforce) by Tom Tunguz:

The price a software startup can charge is a function of the difference in net promoter score between that startup’s product and its competition’s. In other words, a startup product with a very high promoter score compared to the competition can charge a premium in the market and vice versa. High promoter scores indicate great product market fit, good customer relationships, and substantial value creation, all of which translate into pricing power.

Notes:
(1) I like this a lot, because it reinforces the centrality of product quality (in this case measured by NPS, net promotor score) for everything a startup does.
(2) For more on NPS, see Net promotor score — how to set up the survey and How to use net promotor score surveys to improve your product.

3 thoughts on “How to price your product based on quality versus the competition

    • My guess is that most users’ answers to NPS surveys are focused almost entirely on the product experience, in abstract from the pricing.

      But I may be wrong, and this should be testable.

  1. Pingback: Three approaches to pricing | A Founder's Notebook

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