Startups are always a challenge. Sometimes, people get carried away with the details of their offering and trying to beat out the competitors. They might be competing on quality. They might be competing on price. They might be competing on quantity.
Whatever they are doing, they often leave little thought for one of the most important components of startup success: pricing.
Pricing affects so many things in business. One of the most important is the perceived value of the product. Perceived value doesn’t mean fake or inflated value. It has more to do with branding and cache.
Business Owners Don’t Determine Their Own Pricing If They’re Smart
What? You might be asking. How is that even possible? The truth is, smart business owners know that customers determine prices by what they will pay. When they turn down an offer, they are negotiating price. When they buy a product out of stock, they are indicating a price jump opportunity.
Price Affects The Business Owner’s Cost
It breaks down like this: if you spend a ton on marketing and selling a product to convince people to cover your cost, then your cost has just gone up. Some experts even say that price determines cost.
Realize upfront what customers are willing to pay. Make your cost, the thing you actually have control over, meet the price in such a way that you have a profit. How to do this is an art, but suffice it to say that packaging and buying quantity make a huge difference in cost in most cases.
Price Indicates Value
Just like luxury knockoffs are a bad buy if you’re interested in quality, pricing your product or service oddly makes it so that people don’t understand your value proposition. Don’t sell yourself too short or too high on price as a startup. People will not be able to understand what market you are trying to sell to.
It goes almost without saying: if you are selling a luxury or a high-end service, make sure you price accordingly. If you’re offering a great bargain, again let the customer know with the price.
Think of the Customer
Your customer won’t pay exactly what they think something is worth on their own time. Your business proposition must create value that is profitable for the customer. Maybe you are offering a larger quantity than normal or individual units where they are hard to come by.
Your price must reflect the convenience you are offering in some way. It shouldn’t undercut the value, but it can’t be too high either.
There’s a lot to pricing, especially at boutique enterprises. It’s worth more than an afterthought. This is especially true because of the nature of the startup, not in spite of it. When things are just beginning, brands are being built.
All kind of things can happen to a startup to affect their pricing. Having a solid plan upfront helps solidify the buying plans for a business that sells goods. It helps position branding initiatives at other businesses. Pricing is powerful.