Imagine you're working on an email product and a competitor starts charging a $5 monthly fee for their product. How would you assess the situation and what recommendation would you make to your team?

I would suggest my team to price our email product also, at a price slightly  lower than competitor's price, i.e < $5

Explanation:

Price setting can be done, based on two pricing strategies:

If competitor starts charging $5 for the email product : We can either adopt complete price penetration strategy, by keeping our product still free & trying to capture maximum market share. However, 'free' good might create a public perception of the good being inferior quality (ostentation effect). On other hand, we can use price skimming strategy & leverage the opportunity to earn high revenues. However, this might lead to huge loss of market share.

So, a good option could be : To start charging price, for preventing us from that 'free inferior good' image. Also, charging slightly lower than competitors price would make - us earn decent revenues & good market share as well.

I would recommend to start charging Variable fee, based on the amount of task (emails) done.

Given : Working on email product, competitor starts charging $5 monthly fee.

In this case, my recommendation to the team would be to price the product variably, according to the work (emails) done.

As a fixed monthly charge is not likely to be appreciated & welcomed by customers. So if we need to assign price, we can keep fee directly proportionate to the services provided.

This would  increase perceived value of company's product, not only in absolute terms, but also in relative terms compared to the competitors.

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