Because pricing is such a large part of our daily purchasing habits (Groupon?), we have a natural inclination to believe that the it's a major decision for our own startups. The common belief is that pricing follows a traditional economic supply and demand curve, with a lower pricing yielding a higher demand and vice versa. While this is largely true, focusing on this model alone ignores a myriad of other uncertainties facing an early stage startup.
The problem with fixating on price at an early stage is that you're bound to get it wrong. Whether you're wrong on the high or low end is irrelevant, what's important is that an obsession with price can lead to wasted time and energy. Expecting to come up with an optimum price before your product reaches its first set of customers is nothing more than an exercise in futility.
Where energy needs to be expended is on discovering the true barriers to adoption. Price is only one barrier, and within a particular rage it can be a minor one at that. To come up with a list of adoption roadblocks, an intimate understanding of your target market is first needed. A study of your ideal client may reveal any of the following:
- A high resistance to change, perhaps due to high switching costs from their existing solution
- No clear way to reach them, perhaps leading to high acquisition costs
- Technical knowledge barriers
- Trust, security or privacy concerns
- There's risk in using your product, will it be hard for them to get out?
Despite the title, pricing is important for your product in the long-term, but its significance only comes to play if there are no other forces working against you. Focus your efforts on flushing out these hidden barriers to growth and leave the pricing debate for a later date.
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