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When launching a new product, I find that my team and I get nervous when trying to decide what sort of price tag to put on it. Just for the sake of example, we have no access to any sort of funding; we develop Wordpress Plugins and miscellaneous scripts in the internet marketing niche.

Some things we've tried to take into consideration are the following:

  • How long did it take to develop said product
  • Approximately how many customers do we expect to have (estimated through market/niche research and different advertising mediums)
  • The cost of similar products in a particular niche
  • How much risk we're willing to take
  • What does our "gut feeling" says

Is there a formal model that has been developed already?

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I would suggest you de-list bullets points about "how long", "how many customers", "risk", and "gut feelings". None of these are relevant to the mission of maximizing your profits. E.g., for "how long", in the end your product/service has x market value and it doesn't matter if it took you 5 minutes or 25 years. Similar with risk. What only matters is how much people are willing to pay. – Chelonian Jan 9 at 20:47

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Pricing is always a challenge - and there is a ton of advice on the web to review.

Many focus on what value the prospective customer receives, and what pricing anchor they would compare it to. Its up to you to understand what is valuable and whether the appropriate anchor is referenced (example: if someone believes that websites are something that the teenager next door can whip together in 10 minutes, you're unlikely to sell them a solution @ $5000)

Here is a good article to review - lots of relevant links. In addition, priceintelligently has a free ebook "developing your pricing strategy" that is a good read.

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Nice post, to which I'd add that you need to think about segmenting too. The theory is that everyone is willing to pay a different price, so you need to segment your market by offering multiple price points, in order to capture the most value. Customers tend to self-select the appropriate segment. Examples include Home, Professional & Enterprise editions for software and of course, Tall, Grande and Venti coffees at Starbucks. – Steve Jones Jan 9 at 17:48

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