📊 How to Price Strategically in Startup...

4 pricing strategies and psychology insights to consider when taking your product to market

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Taking a product to market requires precise pricing – enough to be sustainable and make a profit but also attractive/worthwhile for your consumer. Which means one thing: They get clear and apparent value from it.

SA founders from like Day 1…

Now many factors will affect your price – business model, how you unlock efficiency, what your market can and will put toward unlocking that value etc.

How you present it, is a pretty exciting field of study all on its own.

Here are some pricing strategies and psychology/neuroscience insights to inspire you…

Startup Pricing Strategies

1. Low entry for market penetration

Ah, the good old undercut: Come in at a lower price point than established competitors, offering the same or better value at a lower cost, to capture as much market share as possible. (And then raising prices later, meaning you sometimes run intentionally at a loss for a while.)

Works well:

• When you have the marketing budget (funding)
• When you use tech to create efficiencies they can’t compete with, like Rain.

Surprisingly good for:

• Community-powered product-led growth projects like we described in this builder’s corner, i.e. Slack, which went viral cheaply and then raised prices once they had massive adoption.

2. Premium pricing

The exact opposite: Intentionally charging more to create the impression your product’s better. Super-tricky in the startup space but valuable if your product introduces an entirely new take on existing products – dressing up the veldskoen, for example.

Works well:

• When backed by superior tech/processes
• When you have luxury, high lifetime values per sale

Surprisingly good for:

• When your freemium offering so clearly showcases your product’s superiority adoption is a no-brainer (products like Hubspot and Semrush really are that good once you start using them.)

3. Maximised pricing

Similar, except this time you do extensive market research and peg your price at the maximum your market is willing to pay for it.

Works well:

• When it's a super niche space with little competition
• When you’re trying to establish yourself as a premium brand

4. Price skimming

You start at a high/competitive rate and then gradually lower the price over time – you know, like King Price.

Works well:

• When you can use the pricing as “the reason” to buy from you (marketing)
• When you’re the first mover with this strategy in the space.

Bonus: Some Pricing Psychology For You

1. Charm pricing: Instead of R100, say R99.99 to capture a cognitive shopper’s attention (those comparing prices between brands).

2. Prestige pricing: Instead of R99.99, say R100 to capture an emotive shopper’s attention (courses, self-development etc. where the consumer wants “the best”).

3. Greed pricing: Buy one get one free, get 25% off next purchase etc. – the freebie-on-purchase model tends to override logic and gamifies the experience.

4. Comparative pricing: Put two options next to each other at different prices – it shifts the purchase question from “Should I buy this” to “Which one do you want?” (easily the most effective and common on this list).

Got a startup hack or insights to share? Hit reply and we might feature you here, too.

Today’s Builder’s Corner was written by Elvorne Palmer from The Open Letter, who is an expert in SEO, content and audience development.

Connect with him on Linkedin here.

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