• Matthew Lerner

Top Startup Pricing Mistakes (1 of 2)

If you’re thinking about lowering your prices, read this 👇🏼

Setting the right price is hard, especially for your own startup. Most startups hugely under-price their products. But why?

I guess people are thinking "Customers aren’t signing up for the product, so it must be too expensive. Let’s try lowering the price."

Two problems with that:

1. People can't accurately assess your cost until they understand your value. If your marketing does a horrible job of demonstrating the value, prospects will think your product is overpriced. (I’ll unpack that one next week).

2. Usually, money is not the real “cost,” especially in B2B. Companies have plenty of money. What they don’t have plenty of is time / attention! Your real “competition” is probably just the other things filling up their to-do list.

To understand the true cost of your product, interview 5 people who recently signed up, and ask them what they had to commit to in order to become your customer (besides the financial commitment). For example:

  • Did they need to get “buy-in?” From whom? (Boss? Spouse? InfoSec?)

  • Was this a new / unfamiliar product category? Was there even a budget for this?

  • Did it require tech resources to set up?

  • Did someone need to learn a new skill or change their behaviour? (e.g. meditation, weight loss).

  • Could people easily try it before they buy?

  • Were there switching costs to move away from previous solutions?

  • Was anyone worried about losing their jobs?

If your major commitments are not financial, don’t try to fix them with money! (Lowering the price actually makes your product seem lower quality).

Instead, try talking to your recent signups, and make a list of the barriers people need to get past in order to adopt your product. And lower the real barriers instead of your price.

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