Here is a simple economic truth. Fixed overhead continues to eat into your cash month after month. It doesn’t differentiate facile, efficient businesses from slow, disorganized, quality-challenged ones.
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.
Most new business owners tend to undervalue what they charge for their work and services in order to compensate for not being as established as their competitors. As long as you have a top notch customer service experience and offer a product or service that’s similar or better than a competitor, you shouldn’t devalue yourself.
Over the past few weeks, I’ve written a number of posts about Value Propositions and Pricing. They’ve generated a lot of conversation in various venues. One of the things that’s struck me is the lack of discussion on differentiation.
Focusing on deal value colors our strategies and focus. However subtly, everything becomes “what we get from the deal.” But we get nothing unless the buyer gets superior value from our solution and chooses it. So deal value is meaningless unless we understand buyer value.
If you are bold enough to really position yourselves as leaders in your fields you can develop powerful relationships. Most companies simply follow the leader and their brands and brand images reflect this. These are short lived differentiators developed with little thought but appreciated by competitors who appreciate how bold branding can really benefit them.
As a business owner, you want your prices to be fair to both you and your customer. But your price should also reflect the value that your customers are getting. Don’t limit your pricing based on your fears of what customers will think. If you’re still offering value, then you’ll find the customers you need.
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