Before Rethinking Your Price, Try This

Okay, my sister has an incredible mini poodle—think cuddly as can be but can immediately play with the biggest Rottweilers at the park.

Whenever this dog is home alone, they put on the Price is Right for her to keep her company. (Which if you don’t know this old school, gameshow gem, you have to check it out.) I love it—people have to guess the price of everyday things, and if they get them right, who knows, they may get a car!

This got me thinking of the question I was sent in last week around pricing. Is your price right—or is there a bigger question at play?

When I am working with founders one-to-one, this question, and derivatives of it often get asked:

• “What should be my price?”

• “I should undercut the competition right?”

• “Should I be lowering my price...?”

Sometimes when the sales or projections aren’t as expected or that sample product you made is not moving from their spare closet, we jump to the issue being one thing: the price.

Prices can be sensitive– pun completely intended.

Now, prices are critical to many elements of your business, like marketing and sales, but as a startup, discounted prices can help you enter the market, yes, but it can only produce so much longevity.

(Though you can be lean, you will not be beating Shein or Temu anytime soon.)

Pricing has different levers.

In your startup strategy, there are a few ways you can succeed against your competition, which includes:

• Leveraging your Differentiation- Your business is so unique and different that the competitor cannot replicate your selling points within a given time or without a lot of energy/investment.

• Cutting your Costs- Your business is such a cost cutter that it controls elements of the supply chain or owns the vertical system so no costs get passed to the customer.

• Creating a New Market- Your business is future-thinking that you are creating a new market with segments of existing ones.

So, is cost cutting the answer?

As a new venture, you may want to be a cost cutter, but could this a trap door?

New businesses don’t often have the resources, knowledge, or market power to do this effectively. (I.E. look at a like behemoth Walmart, or Salesforce... they have established processes and methodologies in the bag!)

In these beginning days, investment is low, and your team and time is limited. You have not generated the economies of scale yet, and you probably lack the insight in navigating supply chains or scaling processes.

Cost cutting may not be the cut and dry answer you think it is.

How you stand out is how you pave your path.

Differentiation can actually be the biggest key strategy as a budding business. You have the privilege that the Spotify’s, Unilever’s, and KPMG’s do not have.

You are agile to change. Think about it—you’re a speedboat; they’re a cruise ship. You can design, produce, and build a business that is doing something new with something as simple as no code, and you can push this uniqueness like a unicorn riding over a rainbow.

So, how can you be different?

Let us take the example of UglieFruits, a made-up, hypothetical social impact startup that is a dried fruit snack mix made from excess and ‘ugly’ fruits.

Your benefits. Think about what benefits your product or service has, and how you are better than the competition.

UglieFruits is not Cheez-Its. Your benefits range from health–increased vitamins and nutrients–to the environment–by saving fruits from going to waste or the landfills.

Your positioning. Ponder on how you market, message, and place your product/service in the world.

UglieFruits is D2C online-only snack company, and it is priced at a higher price point than bulk dried fruits. You want to (or are) in the hands on healthy microinfluencers on Tik Tok, and your branding is too bold to be ignored.

You’re creating an experience of health and happiness because it comes in a bright yellow box, smiley faced packaging, and with unique flavors based on their audience polls, like Apple Bottom Genes and Bananas for Bananas.

Your secret sauce. What can you uniquely leverage that other businesses cannot?

UglieFruits works with local farms for their fruits in the region, rather than sourcing them at-mass. Think working with Apple farmers in Virginia, catering to young professionals in DC, Richmond, and Williamsburg, but with the in your face messaging as a New York Subway.

You have this direct tie to the farm and the environmental impact you have, but this of course costs more than other companies’ supply lines.

Your landscape. Think about the specifics of your users.

You may not be competing against the millennials in the Target or Tesco specials aisles. You are starting small, scrappy, but bold. But you have developed and designed a persona that is specific for your landscape.

Your snacker’s profiles are 25–35 young professionals with disposable income to support their health and wellbeing objectives in a climate-conscious city. This is the snack they bring to work, show off at the gym, or travel on that girls trip with. (You can even use templates or tools to help!)

This may be an oversimplification, but UglieFruits is not going head-to-head with Walmart brand dried snack mix, because that would be fruitless... (Couldn’t help myself again with the puns today.)

But UglieFruits is unique, and there is a market large enough who value these different facets to make this business successful.

And in this example, it is not immediately discounted.

When you know your differentiation, you can understand how to correctly position your pricing and not immediately discount. (It is harder to raise your prices than lower them with discounts, incentives or special offers.)

Differentiation can be your startup's key.

So, if you are just starting out and building your business, ask yourself some of the questions from the above.

How are you different? Ask yourself these questions before we start discounting the price:

• Who are my ideal customer segments? What are their buying patterns?

• What is their price point for this product/service?

• What is my brand positioning? How am I communicating my value?

• What do I (or my team) do really well that other businesses can’t replicate? What’s our secret sauce?

• What do we have over competitors or alternatives out there? Why are people or should people choose us?

• Do I have proof (primary data preferred) on the market dynamics, pricing, or customer behavior?

Try differentiating as your key strategy in standing out from the crowded competition before you start slashing the price. Get clear, outline your strategy, and look at your value. But, I want to hear what you think—Do share in the comments your take or any suggestions for this founder to take on board!

Want more on costs and pricing (but in a way that does not take an MBA to understand?)

If this is of interest to you, and you want to get into the weeds behind costs and pricing, happy to do a deep dive in a follow up newsletter. Just comment below, drop me a line, or submit it as a Question of the Day.

If this has been useful to you or if you have feedback to improve, please drop me a quick line. Or share with a friend!