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Most Startups Get Their Pricing Wrong
Here’s how you actually work out your price
If your product costs X to make, you’ll likely charge X plus a little extra profit. That’s how business works, right?
Wrong.
Or what about this pricing strategy: “Company X and Y charge similarly or more.”
When I was Head of Growth this was the feedback I got. I found out that the founder and even last minute increased the price of our main product just before launch.
It made no sense to me. How can you compare yourself to a completely different business and a different product?
Too often, brands set up their pricing based on their costs or their competitors.
But your competitors don’t know what to charge either; it’s just the blind leading the blind.
And just because your product costs X to make, it doesn’t mean that customers are willing to pay above that.
Yes, our product was expensive to make. Yes, our competitors were charging similar amounts, but the feedback was time and time again the same from customers who stopped using it: it was too expensive. They couldn’t afford it anymore.
It resulted in a leaky bucket; we were getting more customers in, sometimes on a discount, and losing them because of price.
For other businesses, I saw the same. This was the price as is and too often founders weren’t open to changing it.
Offer a discount, sure? Consider decreasing or increasing the price for good? Scary.
It made me realise that for startups, price was an underappreciated growth lever. So many startups looked at costs, a few competitors and choose a price to stick with, never reconsidering it again.
I’m not saying that these things shouldn’t feed into your decisions surrounding pricing.
But you can’t just assume that customers are willing to pay this much for your product.
That is why I researched into pricing strategy to find a better way and approach to help startups feel more confident in their pricing.
