Your Product’s Pricing is Probably the Problem
It’s either too expensive, too cheap, or just doesn’t communicate the proper value
I’ve been building and launching products and startups for more than 20 years. In that time I’ve become somewhat of an expert on pricing, mostly due to the experience I’ve gained recovering from my own pricing mistakes.
A lot of startups don’t think about pricing much before they launch a new product to market. They do a lot of guessing, and to be fair, a lot of pricing is guesswork — it’s a soupy mix of math, science and psychology. Rarely is there a right answer beyond “sell it for more than it costs to make it,” but even that rigid rule becomes flexible when market share is a critical factor in the early days.
While we’re at it, let’s talk about inflation — for just a second, because I know you’re probably as sick of the topic as I am. Macro market effects like inflation can influence pricing in sneaky ways.
As inflation remains persistent, I’m getting two similar-sounding but very different questions:
- Is our product priced too high?
- Is our product priced too low?
Anyone who has ever been in the position of selling something has asked either or both of those questions at one point or another. It’s that mix of math, science and psychology that makes those questions so persistent and difficult to answer.
But let’s push through it.
Is Our Product Priced Too High?
As the global economy continues to be dragged down by ever-increasing prices and costs, I’m hearing more and more from companies wondering if they should meet their market where it sits financially — cash constrained and cutting back. No one wants to be the product or service that a customer decides they can live without, especially if their product or service is deemed too expensive.
But here’s the thing. It’s rare that I see a price decrease save a customer or even increase their lifetime value to the company. That’s because those kinds of keep-or-ditch decisions aren’t usually made on price. What I’ve discovered is that, unless it’s the most extreme circumstances, for example…