Pricing — slides
Financial Literacy Club
Entrepreneurship · Lesson 4
Pricing
Cost-based, value-based, and competitor-based pricing.
12-minute lesson · learnwithflc.org
Pricing · 1 / 19
Financial Literacy Club
Entrepreneurship · Lesson 4
Pricing
Cost-based, value-based, and competitor-based pricing.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Compare cost-based, value-based, and competitor-based pricing
- Explain cost as the price floor and value as the ceiling
- Use options to capture different customers' willingness to pay
Warm-up
Your cookies cost $0.50 each to make. What would you charge at school? At a stadium? Why the difference?
Think, then write your answer.
The big idea
Pricing
Cost-based, value-based, and competitor-based pricing.
Entrepreneurship · Lesson 4
Price is one of the most powerful decisions a business makes. A small price change can double — or erase — your profit.
Entrepreneurship · Lesson 4
- Cost-plus: add a markup to what it costs you. Simple, but it ignores what customers would pay.
- Competitor-based: price relative to alternatives. Useful, but you need a reason to be cheaper or more expensive.
- Value-based: price based on how much the solution is worth to the customer. Usually the most profitable, and it requires knowing your customer well.
Entrepreneurship · Lesson 4
Your costs set the floor (below it, you lose money on every sale). The value to customers sets the ceiling. Good prices live between them.
Entrepreneurship · Lesson 4
Don't underprice
New founders often price too low to win customers. It's hard to raise prices later, low prices can signal low quality, and thin margins leave no money to grow.
Entrepreneurship · Lesson 4
You can also offer options: a basic price and a premium one, bundles, or rush fees for customers who value speed.
See it
Cost-plus pricing adds a markup to your cost; it's simple but ignores customer value. Competitor-based pricing compares to alternatives. Value-based pricing charges based on what the solution is worth to customers, which is usually most profitable.
| How it works | Watch out for | |
|---|---|---|
| Cost-plus | Cost + a markup | Leaving money on the table |
| Competitor-based | Compare to alternatives | Price wars with no reason to win |
| Value-based | What it's worth to the customer | Needs real customer knowledge |
Real example
Marcus sets a price
- Floor (cost): supplies cost about $5 per pair.
- Competitor: the shop across town charges about $20, with a week-long wait and a long trip.
- Value: customers care most about convenience and speed before events.
Marcus sets a standard price of $12 — well above his cost, below the shop, and convenient. He adds a $20 "event-ready by tomorrow" option for customers who value speed most. Many choose it.
Activity · pairs · 10 min
Price It
- Product: a custom-designed phone case. It costs $6 to make. Similar plain cases sell for about $20.
- Pairs set three prices: cost-plus (50% markup), competitor-based, and value-based.
- Pairs add one premium option (like rush delivery or a second design) and price it.
- Pairs choose their final price and defend it in two sentences.
Check for understanding · 1 of 3
Your product costs $8 to make, and you sell it for $7 to attract customers.
What happens as you sell more?
- AYou make more money.
- BYou lose $1 on every sale, so more sales mean bigger losses.
- CYou break even.
- DCosts disappear at high volume.
B. You lose $1 on every sale, so more sales mean bigger losses.
Pricing below cost means every sale loses money. Volume makes it worse, not better.
Check for understanding · 2 of 3
What usually sets the ceiling on what you can charge?
- AYour costs
- BYour favorite number
- CHow much the solution is worth to customers
- DHow much time you spent on it
C. How much the solution is worth to customers
Costs set the floor. Customer value sets the ceiling.
Check for understanding · 3 of 3
Charging very low prices is always the best way for a new business to succeed.
- True
- False
False
Underpricing can signal low quality, make it hard to raise prices, and leave no profit to grow.
Remember
Key takeaways
- Cost = floor. Value = ceiling.
- Value-based pricing is usually most profitable.
- Underpricing is a common founder mistake.
- Options (premium, rush, bundles) let customers pay for what they value.
Discuss
Talk it over
- Think of something you paid more for than it cost to make. Why was it worth it to you?
- Why is it hard to raise prices after launching?
Exit ticket
Fill in: Cost is the ___ for a price; value is the ___.
Answer on your exit ticket before you leave.
Nice work today.
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