As important as it is to build a good product, pricing it well is key in the long term. Being in a competitive world, young entrepreneurs feel wary of asking customers ‘too much’ for their product. The rule of pricing is – Price the product not based on how much you have worked for it, you price it at what it is worth to the customer. Pricing right becomes critical in a product’s sales. Under-pricing directly hits at your revenue and brand, over-pricing can result in lower sales.
BitShuva was a Pandora like music service for niche genres. The startup built such music services for a host of music niches. When they were approached by their first clients, they had no idea how much to charge. They charged a very nominal fee for offering the service initially. On realizing that the charge was very low, they did try to increase their fee from time to time. However, the startup eventually closed down due to the low revenues of the company, when compared with the opportunity costs of the founders.
Advice – Spend time on pricing your product right. Pricing should be based on the value the product is able to create for a customer.