Hi there,
That's because these aren't priving questions...they're market sizing questions :)
Now, I'm going to answer your two seperate questions.
HOW DO I PRICE?
1. Value-based or Willingness to Pay
When: This is your top choice.
How: Find a $ value for what customers would pay. This is normally adding the revenue increase and/or cost reduction that your customers get by buying your product/service. If it's more of a utility/happiness product, then customer surveys of product comparisons serve well as well.
Then, charge a discounted amount of that WTP, based on your eagerness/desire to capture market share.
2. Benchmarking
When: This is what you have to do if there's competition
How: See what price your competition charges!
3. Cost-based
When: This is what you do if you can't benchmark (i.e. no competition) AND you can't get a gauge on WTP.
How: Figure out your cost structure. Get the break-even point (i.e. how much you need to price the product at for there for be 0 profit per item sold). Then, charge a % margin on top (normally 10-20%)
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What's the step-by-step logic in pricing?
Question #1: Are there competitors (or is this a new market)?
Q1A: If yes, can I differentiate my product?
If yes, value-based
If no, competitor pricing/benchmarking is eliminated.
Q1B: If no, can I determine the value-add of my product (i.e. if saves x costs or a survey says people will pay x)?
If yes, value-based
If no, cost-based
Summary: If you can, you always want to do value-based. This is the most effective form of pricing. If you have "something" to go off of, you use it, else you use cost-based because you have no other choice.
Value-based occurs if:
1) You are a monopoly
2) You are the first entrant into a market
3) You can differentiate your product from other (I.e. monopolistic competition)
HOW DO I MARKET SIZE?
Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.
For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of a similar industry? Then break it down that way.