# Determining Price for Data

3

I have some data that I think is valuable. I have looked at my potential market and I believe there are three potential buyers. While this data is valuable, I believe the market is small. I feel I provide some niche value. My problem is, I'm not sure how to determine a fair price or this information.

Because this information routinely changes, I was going to charge for a monthly subscription to this information. However, I'm not sure how to determine the fair price for the information.

Can somebody explain to me how I can determine the fair price for this niche information?

Thank you!

1

The notion of "fair price" is misleading. Without specifics, any answer you get here is going to sound a little like an economics text book.

1. How much is this data worth to the potential customers?
2. Is anybody else able or prepared to supply equivalent data at a lower cost?
3. Could somebody else supply equivalent data in the future if they realized there was a market for it?

(1) gives an upper limit for how much a (rational) customer will pay. The customer will want to make some "profit" on exploiting the data, so the price has to be a lower than this. If the customer can make a risk free 100% profit on exploiting the data, he or she should be very happy. If the risks are higher, or the investment required to exploit the data is considerable, then the amount a rational customer should be prepared to pay is reduced.

(2) assumes that you can't charge more than the market rate - assuming that there is a market. If there isn't one, (1) governs the price you should charge.

Considering (3) may induce you to charge a price lower than (1) so that nobody else thinks this market is worth entering.

A (probably apocryphal) story to illustrate (3). A reporter asked Bill Gates why Microsoft charged so much for Windows. His reply was that a more interesting question was why they charged so little. (The implication being that by charging less than the price which would extract the most revenue, they could keep the market unattractive to new entrants.)

Hope this helps a little: pricing is hard (particularly for a small market) because you have to estimate the answers to (1) and (2) and have limited opportunities to survey or test.

If the three potential customers are competitors, is this data significant enough to auction it?

0

Here are some ideas - I hope someone with more experience pricing & selling data sets can provide better insight.

1. Do a web search for data sets for sale, locate data for sale that has similar characteristics to your data, and study how these people are pricing access to their data. To help you start on your research, check out the data set pricing on InfoChimps products.
2. After you've determined a couple of reasonable pricing options, definitely test your price and payment method (for example, monthly subscription vs one-time fee) to get some data on exactly what combination creates customers for you in your market & maximizes your net profit overall (not necessarily per sale).
3. If you can, figure out how you can create additional value - it's possible that by using a loss leader tactic, you'll be able to sell your consulting services or additional tools for using the data (upsells) - this may be where you get your real return.
4. Survey potential customers to determine what they think a data set such as yours is worth.

I hope the above helps get you started. I'm looking forward to seeing other people's suggestions.