In determining how much you’ll charge for your products and services, explore the “price umbrella”—how others are charging for competitive or comparable products.
The key to pricing is knowing how much your service is worth for your client. Charge too little, and you’re short-changing yourself and making your client speculate, “If she’s decent, why does she charge so little?”
Avoid being a low-price competitor. It’s a terrible habit. Don’t announce, “I’m new. I’m trying to get established. Therefore, I’m offering my service for less than the existing players. Please buy from me.”
Jim Price, an entrepreneurship lecturer at the University of Michigan-Ann Arbor and author of The Launch Lens: 20 Questions Every Entrepreneur Should Ask (2018,) calls this “apologetic pricing.”
Instead, consider the “proud pricing” approach: “We’re launching this business because we firmly believe in our unique value proposition; we look forward to explaining that to customers and charging a premium price for a superior product.”
Positioning yourself as the low-price market offering is a competitive strategy that tends to only work for large, undifferentiated retailers and similar businesses, and it is a poor prescription for entrepreneurial startup success.
Being the low-priced competitor tends to require massive operational and financial scale and often results in an undifferentiated product or service offering and a business with very narrow profit margins.
Idea for Impact: Don’t get stuck in the race to the bottom to be cheaper. Marketing expert Seth Godin has reminded, “Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.”
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