3 Old-School Pricing Techniques That Still Work Today

1. Cost based

"It's easy and doesn't require research," says Kyle Jensen, director of entrepreneurship at the Yale School of Management. "People figure, 'I know what it costs to make this widget, so I'll just tack on another 20 percent and feel good about myself.'" But what if that widget changes someone's life a thousand bucks' worth? In that case, says Jensen, you've created a lot of value and failed to capture it. But Scott Gabrielson, founder and owner of Oliver Cabell of Minneapolis, which designs and produces high-end travel bags, used transparency to establish pricing yet still capture value. How? By listing online the exact product costs, including materials, labor, and shipping, as well as a 2.25-times markup. "We found this builds trust with our customers and keeps us authentic," he says.

2. Comparables based

If you charge more than competitors do, any other advantage you have can be undercut. Robert Ellis, founder and owner of Bavarian Clockworks, in Chicago, an online seller of Black Forest cuckoo clocks, was losing out to discounters. "People used our website as an educational resource but bought their clocks from competitors with a better price point," he says. Matching the lower prices rewarded the company for being a resource.

3. Value based