Pricing Models (Thu Nov 16, lecture 21)

Homework due for today

Legend: :Participation :Early :PDF

  1. Term Project Stage 2 Complete Look at the Term Project Outline and make sure you have completed all the deliverables stated there. In addition, write and submit the Team Retrospective. Deliverable: Iteration Retrospective as a pdf . (Begin work on Stage 3!)
  2. Reminder Stage reviews are happening right now. Look at Stage Checkin Meeting with Pito for a reminder on what it is.
  • 4 groups, random, 20 minutes
  • You are a 10 year old entrepreneur running a neighborhood lemonade stand. You want to make some money doing this. What are some models that you could put in place?
    • Charge 50 cents per glass of lemonade
    • Chare 25 cents for a small, and $1.00 for a large lemonade
    • There are many other possibilities
  • Work with your team on the following
    1. Come up with many variants of pricing models as you can
    2. Try to come up with a classification of those models, in other words look for the patterns, for example: what is being charged for, what is free? who is paying, who is getting something for free, what costs are fixed and which ones are variable, and so on.
  • Prepare to present the results using the whiteboard if necessary.
  • What are some principles we learn from this exercise?

Pricing Models

  • My terminology
  • A subset of the business model
  • Explanation of who pays and what they pay for
  • Ask yourself some questions:
    • Who is getting value out of this business?
    • Who is willing to pay for that value?
    • What exactly are they willing to pay for?
    • When are they most likely to be willing to pay for it?
    • How often are they willing to pay for it?
Discussion about “our” products
  • Each team come up with at last TWO distinct pricing models for your product.
  • Take 15 minutes. Consider:
    • Will the model “make sense” to the buyer?
    • Will they be willing to pay it?
    • Is the pricing anchored with any other prices or expectations?
  • Present them to class
Freemium as a pricing model
  • (play on words with “Premium”)
  • Base product is free
  • Has some limitations
  • Pay for “full product”
  • Tiers of “full product”
  • The Price of Free Apps


  • Pricing as a hypothesis
  • How to test
    • “What would you pay for this?”
    • “Would you buy this for $20?”
    • “How much do you think this is worth?”
    • “What’s the most you’d pay?”
  • How it fits into the financial model

Discussion about this course

  • Take 5 minutes to think and write down some notes
  • A friend asks if he/she should take this course. Would you recommend it? What would you say students need to do if they want to do well in the course?
  • If you were to take this course again, would you do anything differently? What and why?
  • What’s the relationship between natural ability and hard work? Can you still learn things for which you don’t think you have much natural ability? Can hard work overcome natural ability deficits?

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