Every new business quickly realizes that revenue coming in every period on a committed basis is the Holy Grail to survival and growth. According to many experts, getting new customers is five to ten times harder than getting additional revenue from existing customers.
There is a growing awareness in retail that a once surefire way to save the day is gone forever. When all else failed, retailers could always compete on price. Those days, in the words of the old song, are dwindling down to a precious few.
Well into the 20th century, miners used canaries as a way to detect methane and carbon monoxide in mines. As long as a canary was singing, all was well. If a canary died, it was time to abandon the mine immediately. It meant the oxygen was running out.
One of the toughest decisions for a startup is how to price their product or service. The alternatives range from giving it away for free, to pricing based on costs, to charging what the market will bear (premium pricing). The implications of the decision you make are huge, defining your brand image, your funding requirements, and your long-term business viability.
I recently had a truly unusual, memorable experience facilitating a discussion about pricing. What made it unusual? There wasn’t one question about pricing. Yet every person there described their ‘problem’ as a pricing problem. What were the real issues?
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