Build Your Business Like a Wargamer: Pricing Strategy and the Art of Trade in Catan

Authored by: Dirk Vander Noot

When it comes to business, pricing strategy is a critical decision that entrepreneurs often get wrong… the first few times. To be honest, it is a very difficult balance between setting prices too high, which loses potential customers to competitors, and setting them too low, making it difficult to recover cost let alone ensuring some profit margin. 

Interestingly, this delicate balance mirrors how players engage in trade within one of my favorite board games, Catan. A savvy trader in Catan must evaluate, and re-evaluate the supply and demand of their resources each turn, leave room in their price to negotiate deals, and strategically leverage their resources to meet the end goal before any of their opponents can, earning 10 points. This not only makes for an exciting game night, but here is why business owners should approach their pricing with a similar mindset.

Learning Pricing Strategies From the Economics of Catan

When is a price too high, and when is it too low? At its core, Catan, like business, is a game of resource management and negotiation. Players gather resources  which can be utilized or traded. This resembles the resources that we handle in our businesses. These may include the time and talent of our team members, the products we create, or anything else that others attribute value to that we can provide. These resources, like those in Catan, hold a fluctuating value depending on what others need, as well as their availability to us. This means that we must recognize what our cost was to acquire those resources as well as how we can utilize them to achieve our end goal. 

To establish what is too low, consider your costs. In Catan it is pretty simple, if you make a trade offer that the whole table jumps at, then your deal is likely way too good. In business this is similar, but we must also consider our additional costs. We didn’t just come by our resources by placing plastic houses down and throwing some dice. The common costs in business are production, sales & marketing, distribution, and administration. Each of these costs should be accounted for to determine a minimum viable price, where profit margin is no less than 0%. One way that I have effectively done this is by building a pricing calculator in an excel spreadsheet. I simply enter each cost in and a profit margin that I would like to attain and it will provide the minimum price.

Now let’s establish what is too high. If you make a trade offer and no one is interested, you’re probably asking for too much. Pricing too high is all about the perception of your target audience. If you have been working on your pricing strategy then the best place to start is by surveying your target customers for their sentiment. What feedback have you received from them? Next we can take a look at the public information your competitors provide about their pricing strategies. If you do not have any direct competitors, then consider what your customers are currently doing to solve their problem and how much it is costing them. The key is to provide a better value proposition that your customers currently have access to. If our customers can not justify the price according to their other options, then our price is too high. 

Negotiation and Justifying our Value Proposition

In Catan, you can be a successful trader if you don’t just rely on the raw value of your resources, but also factor in how we can increase their perceived value. Did a player not realize that the sheep we are trading will allow them to get 2 points closer to victory? Sharing that information with them will likely increase the value of that resource in their minds. Last time we played I made the following proposition to my wife Laura “I see that you could use a wood to complete that town you are working on, I could provide that wood to you if you are willing to trade me your stone.” What Laura didn’t know was that stone would build me a city and keep me ahead in the game. I will let you decide if she took my offer or not. Think of how you can frame your offer to increase your target customers' perceived value of your solution in their lives. 

In business we can create messaging and frame our offer to increase our customer perceived value by following this framework:

1. Identify the problem your customers have. 

2. Position your offer as the solution to that problem and give them a plan.

3. Share the negative of what will happen if the customer does not purchase your solution.

4. Share the positive of what will happen when the customer purchases your solution

5. Call them to action to follow the next steps to becoming your customer.

Set your Price like a Catan Player

Pricing strategy isn’t just about setting a number—it’s about understanding your costs and positioning your value effectively. Experienced Catan players know the cost of their resources as well as their perceived value to other players. So price your goods or services high enough to cover your costs and low enough to meet your target customers' perception. Remember to review and fine-tune your pricing strategies regularly to stay ahead in the game. Next time you're working on your pricing model, think like a Catan player: Consider your goal, keep an eye on your costs, and always look for opportunities to increase the perceived value of your goods to your customers.