# Three anchors: cost, alternative, value > What a price must cover, what the buyer would do instead, and what the difference is worth: the three anchors of any price and the corridor between them. - Course: [Pricing: Set, Package and Raise Your Prices](https://productovi.com/courses/pricing.md) - Module: How low can the price go, and how high could it reach? - Lesson 1/32, ~22 min - Source: https://productovi.com/courses/pricing/three-anchors ## Where you work **Alex Tutor:** Welcome to the course. **Klasna** is an online tutoring school from Kyiv: English, exam maths and programming for teens, sold in packages of 8, 16 or 32 lessons, plus **Klasna Club**, a monthly subscription. Families in Ukraine and the EU learn here. The price list hasn't been rethought in years. **Alex Tutor:** You've just joined the growth team and take over the price list with **Nazar**, head of Klasna Club. You'll set, package, present, discount, raise and test prices; **Dana**, a Klasna tutor with her own small practice, tries each idea on her own rate. Today: the three anchors of any price. ## A price by Friday **Nazar:** We're launching **NMT Sprint** in March: eight weeks of maths exam prep, one price for the whole sprint. Leo wants the price by Friday. My plan: the learning centre on Khreshchatyk charges 8,000 for its spring course, so we ask 7,900 and win on price. **Sofia:** Shouldn't we at least check what a sprint costs us first? **Alex Tutor:** Both are a start, neither is a method. One rival's price is one of several options a family has, and that one is a group course, not one-to-one lessons; our costs only tell us how low we can go. A defensible price stands on **three anchors**. **Alex Tutor:** One: what a sale costs us, the **cost floor**. Two: what the buyer would do without us, the **next-best alternative**. Three: what our differences from that alternative are worth to the buyer, the **value of the difference**. > **Exercise:** Which three anchors does a defensible price stand on? ## The floor: which costs count **Hanna:** For the floor I need the costs that come with each extra sprint: tutor pay per lesson, video and AI, the payment fee, scoring and reviewing mocks. **Sofia:** What about the marketing campaign and the coordinator for the season? Those are real costs too. **Hanna:** Real, but they don't grow with each sprint. They decide whether launching pays at all, not the lowest price for one more family. **Alex Tutor:** So the floor: below it, every extra sale loses money. Next lesson you'll compute it for Klasna's lessons and the Club, using contribution from the finance course. > **Exercise:** Hanna, Klasna's head of finance, is building the **floor** for one NMT Sprint. Which costs belong in it? Choose all that apply. ## The ceiling: what the family would do instead **Sofia:** So for the ceiling I look for the cheapest option on the market? Free exam videos cost nothing. **Alex Tutor:** Cheapest isn't the point. The next-best alternative is what *this* family would actually do without us. Parents who want a person checking their child weekly won't switch to videos; they'll hire a tutor. **Alex Tutor:** So we ask, not guess. Klasna asked parents of last spring's exam-takers what they'd have done without us; you'll read their answers in this module's case. **Nazar:** And if most say "a private tutor", we compare with the tutor's price, not with free videos. > **Exercise:** Free exam videos are the next-best alternative for NMT Sprint, because they are the cheapest option on the market. **Alex Tutor:** And how do we learn what families would really do without us? > **Exercise:** How should Klasna find out what NMT Sprint's next-best alternative is? ## The difference, in money **Alex Tutor:** Third anchor. Against a private tutor, the sprint adds full mock exams, scored and reviewed. Parents already buy mocks separately, so that plus has a market price. **Sofia:** And the minuses? We're online only, and some parents prefer a tutor at the kitchen table. **Alex Tutor:** Then that difference is negative: subtract it. Honest value counts both sides. With no market price, estimate from parent interviews and label it an assumption. **Alex Tutor:** Together: **ceiling = alternative's price + net value of the difference**. The price sits between floor and ceiling, in the **price corridor**, leaving the buyer part of the value, so switching to us feels like a good deal. > **Exercise:** Match each fact about NMT Sprint with the anchor it informs. ## Inside the corridor **Nazar:** Fine, but where exactly inside? I'd rather go right up to the ceiling. **Alex Tutor:** At the ceiling the family is indifferent between us and the tutor, and any doubt tips them away. Leave the buyer part of the value. How much depends on your price stance, and that's next module's topic. **Hanna:** And if the corridor turns out empty, with the floor above the ceiling, we don't launch at that cost. No clever price fixes that. **Alex Tutor:** Here's a quick check with made-up round numbers before the real ones arrive. > **Exercise:** An example course: the floor is **6,000**, the next-best alternative costs **9,000**, and the net value of the difference is **+1,000**. Which prices are inside the corridor? Choose all that apply. **Alex Tutor:** The corridor is 6,000 to 10,000. Nazar wants 10,000 exactly. What do you say? > **Exercise:** In the example, the corridor runs from 6,000 to 10,000. Nazar wants to charge exactly 10,000, the ceiling. What is the main problem? **Alex Tutor:** Last check: what if the floor comes out above the ceiling? > **Exercise:** If the cost floor turns out higher than the ceiling, a clever price just under the floor can still make the launch work. ## Your turn: reply to Nazar **Nazar:** Leo will ask why we don't just go a bit under the learning centre. It's quick and everyone understands it. **Alex Tutor:** Write Nazar a short reply: why "a bit under the learning centre" isn't enough, and the three things you'll find out before Friday. **Sofia:** Floor from costs per sprint, the alternative families really name, and the differences in money. **Alex Tutor:** Yes. And keep it friendly: watching rivals is useful, Nazar just started from one input instead of three. > **Exercise:** Nazar proposes pricing NMT Sprint at 7,900, "a bit under the learning centre's 8,000". In 3–5 sentences, explain why that isn't enough on its own, and name the three things you will find out before Friday to set the price. > **Key ideas** > > - A defensible price stands on three anchors: the **cost floor**, the buyer's **next-best alternative** and the **value of the difference**. > - The floor holds only the costs that come with each extra sale; fixed costs decide whether to launch, not the lowest price. > - The next-best alternative is what the buyer would actually do, found by asking, not the cheapest thing on the market. > - Ceiling = alternative's price + net value of the difference (pluses minus minuses, assumptions labelled). > - The price sits inside the corridor and leaves the buyer part of the value. An empty corridor means: fix the cost or don't launch. **Alex Tutor:** Next: the floor in numbers, per Klasna lesson and per Club member. - Next lesson: [The floor per lesson and per Club member](https://productovi.com/courses/pricing/the-floor-per-lesson.md) --- Productovi Learning. Free, no sign-up needed to read.