Lower Price Is Never Your Startup's USP

"Price is what you pay. Value is what you get." - Warren Buffett

About a few months ago, I was working with a startup founder on his business plan. He was having some issues with not being able to cover his costs when selling his product. So I sat with him and tried to understand what was going wrong. During one of our meetings, I overheard him talk to one of his clients and that’s when I realized what the actual problem really was.

The conversation I heard went about like this:

Startup Founder: *quotes his price for the product.*

His Client: “This is too expensive.”

They talk for a while. And then,

Startup Founder: “Well, I can reduce the price by 30% and offer you some extra services with the product.”

Client: “That’s still expensive but I guess it’ll do.”

***

Noticed what went wrong here?

That’s exactly why Lower Price should never be your Startup’s USP.

The aftermath of this conversation would be:

1.    The client would lose respect for the founder and would keep taking advantage of the fact that he would always lower his prices to get sales.

2.    The client would then expect services of high quality for dirt cheap prices.

3.    The founder would soon start feeling the pinch of his decision and beat himself over it.

This right here is the problem. Low Pricing is never a strategy. It starts with a business lowering their prices, another business lowering their prices further and so on. This is how businesses and industries get ruined.

Pricing is the most important aspect of any business. Setting correct prices for products is the most important decision every company has to make. But most startup founders treat pricing as an afterthought. They don’t put enough time and effort into their pricing strategies.

Startups have this habit of setting prices low to attract customers. That is a good way to start a business and to attract customers. But startup founders need to learn the art of setting and changing prices. They should know when to increase the prices or suffer the consequences.

The price you set for a product also influences its perceived value.

“The moment you make a mistake in pricing, you're eating into your reputation or your profits.” - Katharine Paine

Things are changing fast. We are now in an era where customers are more learned and want to have their money’s worth for the products they purchase. The focus has shifted from products to value. Customers expect you to know your product in and out along with having answers to their pressing questions.

Gone are the days when businesses thought they could do away with just fulfilling the bare minimum needs of their customers. Nowadays, in order to attract and retain customers, business will have to offer high quality services and experiences which customers are ready to pay for.

Our strategy at LFS is exactly this. Doing an INR 10,000 work for INR 1,000 is not something we want to do.  We want to work to provide a value of INR 100,000 for INR 10,000. Our clients should be satisfied with the value we provide them and should help meet their goals as well.

When one offers more value than the competition, customers are ready to pay the premium price.  In this era of value, it’s all about empowering the customers.