Activity:

Estimate Your Revenue and Price

Remember the price that you set for your product/service offering while testing your solution demo, and later
your MVP? As Ash Maurya says, pricing is more art than science. Therefore, you need to set a price early enough
so that you can test and validate that your customers are indeed willing to pay this price.

In the video, Pricing, you looked at the science behind pricing and learned about the following three strategies:

 Maximization – It is the process by which a company determines the price and product output level
that generates the most profit. This works great when all customer segments have a similar
willingness to pay and when the optimal short-term and long-term prices are equal. Starbucks is a
good example of maximization. Its highly popular coffees are priced at a premium to maximize profits
Foundational Course in Entrepreneurship

per cup.
 Market Penetration – This strategy involves pricing the product at a low price to win dominant
market share. The strategy is to price your product low to maximize broad adoption of the product.
A startup called Slack Technologies uses this strategy. “Slack for teams”, is a single workspace for
small to medium companies or teams. Slack’s pricing strategy has a free basic plan and a low-priced
annual subscription for its premium product.
 Market Skimming – It is a profit-maximization strategy usually used for high tech and
low-availability goods. In skimming, you start with a high price and gradually broaden the product
offering to address more of the customer base at lower prices. Apple sells the latest iPhones at the
highest prices and repackages older models at lower prices to address different customer segments.

Instructions:

1. Work in the same teams of five that you formed earlier.

2. Refer to the results of the solution demo and the MVP interviews that you had conducted in the previous
lesson.
3. Revisit the initial pricing that you had set keeping in mind the results of the solution demo and the MVP
interviews.
4. Think which pricing strategy best suits your product/service. Then, keeping in mind the price of existing
alternatives, reset your price.
5. Reopen the Excel workbook Basic Financial Plan Template that you worked on in the previous session.
6. Open the tab Your Business Idea and fill in the Revenue section:
a. The number of customers you expect every month in C15.
b. The number of units each customer purchases every month in C16.
c. The price that you think the customers will pay per unit in C17.
d. The purchase frequency of each customer in C18. Purchase frequency is the number of times that
you think your customers will come back every month. In case you are counting every returning
customer as any other customer, put only ‘1’ here and put the total number in the “number of
customers” section.
e. C 19 is a formula-driven cell and calculates the total sales in units determined by your earlier inputs.
f. C 20 is also a formula-driven cell and will automatically calculate the total sales revenue for you.

Money
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 Activity:
Estimate Your Revenue and Price

g. Note:
o Don’t fill in the cells marked with red text, such as Total sales in units and Total sales
revenue. The template will automatically calculate these fields for you using the relevant
formulae.
o You may add rows to the sections if you have more items to add. Do not tamper with the last
rows, in red – these are formula-driven and automatically calculates all your inputs to give
you the total for that particular section.
7. Reach out to your facilitator in case you have any questions.
8. You have 30 minutes to complete this activity
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