Should You Price Your Product Low Or High?

Every entrepreneur goes through this dilemma – should you price your product low enough to make it affordable to everyone; or should you price it high enough and win on margins? When I recently sat down to talk to over a hundred entrepreneurs for my book, “How We Did It : 100 entrepreneurs share the story of their struggles and life experiences“, this was one question I wanted them to answer most candidly. After all, I was still deciding how to price my own book!
The responses were not only candid, but also extremely valuable advice. Here are a few excerpts from the answers I loved.
Jeb Blount, Founder, Sales Gravy
I realized very early on that selling books, sales training products, and banner advertising was not a viable strategy. My niche was not big enough to turn those endeavors into real money makers. That got me thinking about where the money was in my niche – that was jobs. That is when we shifted our focus to becoming the hub for sales jobs on the web. That strategy has paid off for us and has allowed us to expand
Jay Barnett, Founder, Priority Pickup
My market is price sensitive and it is competitive. In a market such as mine, I either have to reduce prices to win more business, or ad value.I choose to add value to my service, because you never really win a price war.
Zeb Couch, Founder, SpeedHatch
For Speedhatch, we created several different landing pages with different one-time prices and monthly prices. We went with the one that converted the most paying customers, while also providing us with the highest acceptable stream of revenue.
Joel Simkhai, Founder, Grindr
I decided early on I that I did not want to rely on VC funding so having a revenue model was important for me. Once I realized that Grindr was providing real value to our users, we started to develop Grindr Xtra, a premium subscription service. Grindr Xtra allows users to see more guys around them, add filters to see specific types of guys and really heightens the Grindr experience.
Sam Tarantino, Founder, GrooveShark
Monetization had always been advertising-driven given how we were seeing start-ups like YouTube, Facebook, Tumblr, etc. grow. For us, though, we realized the consumer, especially young consumers, were shifting their investment in music from buying the music itself towards spending even more on live events. This added to our long-term monetization strategy to take advantage of this new trend.
John Brady, Founder, Protem Partners
We had a benchmark which was market rate for related and/or similar services. So we discounted beneath that benchmark rate during account acquisition in the beginning, and then raised rates from there as we built a brand and became better known. The important part of the exercise was sitting with a spreadsheet and being realistic about costs, possible unexpected expenses personally (what happens if the car needs a major repair or the hot water heater goes in the next 12 months?), research about business expenses, and then determining how much we could afford to charge or not charge and for how long.