One of the first problems facing an entrepreneur starting up a new business is the question of what price to charge for the company's product or service. This problem is even more complicated when multiple, related products are being sold. This more complex problem is referred to as the joint-product pricing problem.

In the early 1990s, U-Haul, Budget, Ryder and Hertz-Penske competed intensely in the truck rental market. U-Haul appeared to be the most vulnerable because its trucks had higher maintenance costs, but it charged lower rental prices.

However, if you looked at the bottom line, U-Haul had the highest profit margins; its margins were 10 percent when the industry averaged only 3 percent margins. U-Haul management understood that most customers made choices based on the average daily rental rate for the truck. But once the truck had been rented, customers stopped shopping.

U-Haul knew that the truck rental was only the first piece in meeting the needs of the customer. Once the truck had been rented, customers would need boxes, trailers, insurance, storage space and a variety of other accessories to get the job done. U-Haul charged low daily rental rates to lock the customer in and then priced the accessories at attractive margins.

Have you ever wondered why computer printers never seem to use the same ink cartridges? Wouldn't it be a lot more efficient to have interchangeable ink cartridges?

Printer manufacturers know that the real profit lies in the ink sales after the printer has been purchased. They make little profit on the printers but charge high margins on the ink after the customers have been locked in to their printers and have no choice but to buy their cartridges.

A similar phenomenon occurred in the early days of computers. Back in those days, a company called Univac dominated the industry. IBM was mostly a typewriter company, but when they entered the computer market they practically gave computers away to universities. When the first computer science students graduated, the companies who hired them asked what computers to buy. The answer was: "I only know how to program IBM." Univac was history.

But the real story is what followed.

Because of the advantage created by their success with universities and university students, IBM not only sold computers at much higher prices, but they also made substantial amounts of money with the aftermarket service and support.

The aftermarket became a fearsome barrier for new computer manufacturers. Not only was it expensive for customers to switch computers because all of the software would have to be rewritten, new competitors could not afford to have service offices near customers because their installed base was so small. With its huge installed base, IBM could afford to put a service office within an hour or two drive of every customer.

Early on, computers frequently went down. Companies were afraid to buy a computer without having a service support office nearby.

Eventually the competition responded with more reliable computers for which service support was no longer critical and software could be easily transported from one make of computer to another. But for years IBM enjoyed enormous profitability.

Entrepreneurs should study both customer needs and how customers make decisions. Prices should be set to attract the customer at the decision point. But don't forget that major profits can be made after the decision point by helping the customer finish solving the problem.