Pricing tips for a startup to make an expensive offering look like a good bargain

One of the most of common objection in the introduction of a new offering is the PRICE, be it’s a product or a service. While a Startup would like to position itself on the top of pricing pyramid for better margin and branding purpose, this situation is a bigger challenge especially for a start-up, Why?

  • A startup brand is not recognised and hence value perceived from offering is not very clear or acceptable
  • A bottom end pricing policy may pose difficulties in charging higher prices later on
  • A bottom end pricing gives an impression on cheaper or lower end offering

So how does a start-up keep the pricing of its offering at a higher end, yet it may appear like a good bargain. Some are easy way to do so are listed here

  1. Make an expensive variant and place it on the side of the general offering

    This is called contrast effect the expensive offering is making the general offering looking like a bargain.For e.g, in case of a LED TV, big screen TV is advertised at very high price and normal TV at a slightly higher price than comparable TV of other brands. This gives an impression of a company in high-end technology product and normal TV screen is a bargain at this price.

    [cryout-pullquote align=”left|center|right” textalign=”left|center|right” width=”33%”]

    Mistake in Pricing can be really costly, it not only fails your startups offerings, but you can risk your reputation forever

    [/cryout-pullquote]

    A prospect may think it might be built in the same factory or with the same technology. Another advantage of this approach, if someone buys an expensive product it gives a good margin to this startup as well as acceptability.A startup should always try leading with an expensive product, this is to use the primary effect of the first information displayed. In the price comparison table always position most expensive product to left of the table or the top of the table

  2. Introduce the smaller packages of the offering

    If you would have noted the smaller pack pricing looks smaller, but if prices is added to make a large pack the prices adds to more per unit price as compared to a large pack for same offering. This technique is also used very commonly in subscription sale where the smaller duration packs are advertised, this is good for trial as well to catch the attention. Asian paints used this trick very successfully when they introduced smaller packs of 50 ml of oil paints

  3. Divide the prices in terms of daily use and then compare with some-thing of a daily use

    The common way of this type of advertising is to compare with something of daily use for e.g. This Gym package cost less than the cost of a daily coffee or newspaper etc.

    This is good way for selling subscriptions for cloud- based offering for e.g A start-up offering ERP for a school can divide the yearly prices with no. of days in year and show that the subscription cost is less than cost of a single accountant per month.

  4. Increase the value of offerings by associations

    The association can play a major role in convincing prospect to pay a higher price. Dental creams use this technique by building the association with the Dental Surgeon associations. Some companies use the association with academic institutes, research labs or publish the patent secured etc.

    In case of software startup, team profile plays an important role in building an acceptability of the product or services. Some time companies associate many services together as the bundle and increase the perceived value of the products. A start-up can gain a good chance to sell at higher points by associating with well-known brands in the complementing sector. Like a healthcare startup for kids if associated with a nutritional drink brand, it is perceived that start up has some-thing of better quality to offer

  5. Payoff Method

    This technique convinces the prospects by providing a calculation for payoff for investment in offering of a startup. Startup in B2B arena can use this technique to convince the user to invest early and show the return on the pay-off. Again using the given above example of a start-up offering ERP for a school can divide the yearly prices with no. of days in year and show that the subscription cost is less than cost of a single accountant per month. The startup can easily show the pay off by saving incurred by not hiring the 2 more accountants for the same job and data backup. They can also showcase the enhanced user experience for the parents, teachers and staff.

  6. Create a visual imagery of luxury

    This technique is quite easy and most often used by Startups. Create a visual impression of luxury by use of appropriate colors and design. For e.g. Violet gives an impression of luxury. Some other ways of creating visual imagery is

  • Use high-quality photographs in website and product brochures
  • Focus on aesthetics and functionality in a design of a website, product brochures, visiting cards, visitor lounge etc.
  • Creating aspiration content and story-line to connect to the prospect.

If a startup is able to execute some of these simple tips given above, it would be able to justify the same or higher prices of new offering to its prospects. Pricing the products and services on the higher side will help to position the brand on the higher end of a market spectrum and maintaining higher margins.

[ad name=”Bottom_LetterBoard”]

Tagged , , . Bookmark the permalink.

About Sudeep

I am an avid reader, an average writer, an amateur painter and a consultant by profession. I also did my mechanical engineering and MBA to earn my bread. If you liked my thoughts and images please do comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.