Value-First Pricing
Make the product excellent first, then set a price the value supports
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 4
- Confidence
- 98%
McFarlane reversed the large toy companies' usual sequence. Rather than start with a required retail price or manufacturing cost and strip the product down to fit it, he aimed to make the product as good as possible and price it afterward. His first action figures cost more than the category norm, but he argued that the answer was not to disguise a cheaper toy at a higher price. It was to provide at least the amount of value charged, preferably more. This gave his smaller company a way to compete against famous licenses: add detail, paint, plastic, and visible quality that buyers could recognize through clear packaging. The framework relies on real customer-perceived value, not premium pricing by assertion.
Origin
McFarlane explains how he priced and differentiated his first action figures against established toy companies.
Core principles
- 01Customers pay more when they can see credible additional value
- 02A higher price fails when the product only delivers the lower-priced alternative
- 03Product quality should set the feasible price rather than a target margin setting quality
- 04A challenger can compete with famous brands by offering more value
How to run it
- 1
Ignore the category ceiling
Treat the prevailing price as a description of incumbent products, not an immutable limit.
Watch out A higher sticker price alone creates no value.
- 2
Maximize useful quality
Add the detail, materials, functionality, or finish that customers genuinely value.
Pro tip Make the improvement visible enough to pass an immediate comparison.
Watch out Do not add cost that the intended customer does not care about.
- 3
Price after creation
Once the product and its value are clear, choose a sustainable price that reflects them.
Watch out Confirm that the resulting price still fits a real market.
- 4
Overdeliver against the price
Give customers at least the value they pay for and, where possible, a little more.
Pro tip Compete like a premium product offered at a mass-market comparison point.
In the wild
When standard action figures sold for $5.99, McFarlane priced his at $6.99. His response to incumbents was to give customers $6.99 or $7.99 of visible value through better quality and more material rather than trying to overcharge for the same toy.
→ The products differentiated McFarlane Toys despite lacking brands such as Star Wars or Superman.
Common mistakes
Pricing the old product higher
Charging $6.99 for a product that still delivers $5.99 of value is overpricing, not value creation.
Letting margins design the product
Starting with a rigid cost target can remove the details that would make the product worth choosing.
Is it for you?
Best for
It is best for challengers that can make quality and value visibly superior to larger competitors.
Not ideal for
It is not ideal where customers cannot perceive the improvement or where added quality destroys unit economics.
From the transcript
“Here's how you sell a 6.99 toy: you give them $6.99 of value, period. Oh, I'll even give you an upgrade. Give them 7.99 of…”
“I go make the product as good as you can, price it afterwards. And if it's of value, people will pay you the money.”
From the episode
#643: Todd McFarlane, Iconic Comic Book Artist — Lessons from Stan Lee, How to Make Art that Outlives You, How to Compete with Corporate Giants and Win (While Having Fun), Dealmaking Strategies, War Stories from Wall Street and Lawyer Land, Taking Responsibility for Your Life, and Why Creators Need to Smash Limits
Stan Lee