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Estd 4.22.2023
When creating a new category without direct competitors, our book Price to Scale explains that you need to rely on a combination of customer-centered value insights and alternative market signals rather than established benchmarks. Here are some key strategies and signals recommended in our saas pricing book:
• Directly assess the value delivered
In a blue ocean market—where your product replaces an existing way of doing things—you should focus on the tangible benefits and cost savings your solution offers. Identify how your product transforms a customer’s workflow or improves outcomes, then quantify that value in financial terms.
• Use alternative benchmarks
Even if traditional competitors are absent, you can look at what customers are currently paying for alternative solutions or workarounds. These “replacement costs” become a proxy for forming an initial price anchor, helping you understand what price range might appear attractive while signaling quality.
• Conduct targeted customer research
Our methodologies emphasize designing surveys or interviews that first set the appropriate context for the new category. Rather than directly asking for a price, you can:
- Provide a detailed explanation of the problem your product solves.
- Use a range-based approach to gauge potential customers’ reactions to low and high price points.
- Force-rank pain points and key benefits to understand where customers see value.
• Leverage price elasticity and willingness to pay
In our book, the discussion around blue ocean categories shows that when there’s high price elasticity (for example, customers with a significant ability and willingness to pay), the product can sometimes command a premium—possibly 5-10x what you might expect in a market with direct competitors.
In summary, when benchmarks are scarce, you should anchor your pricing decisions on the value provided, the cost of existing alternatives, and refined customer insights gathered through well-designed, context-setting research. This integrated approach not only helps you set a competitive price but also validates the perceived quality and market fit of your innovative new category.