High-End Pricing: Differentiate or Die (Not X for Y)

Sat, Sep 29, 2012 - 6:26pm -- Isaac Sukin

Pricing is a funny thing. It depends a lot on psychology -- how can you convince your customers that they are getting a deal while charging them the highest reasonable value? You've heard people say "differentiate" before, but I bet you haven't really thought deeply about whether you're really different. Here's a test: are you an alternative, or are you your own category? If you didn't exist, what would people use instead, and how would they feel about it? Are you a category leader or are you a small player that tries to be better than the leader?

If you want to be at the high end of the market -- a great place to aim for many startups, since being at the low end can be disruptive but requires larger scale to be profitable -- forget about your competitors (for now) when thinking about your marketing and pricing strategy. The moment you publicly frame yourself as "X for Y" or "X but better" you have immediately defined your price ceiling and who your competitors are. Often having a reference point a good thing for customers, but if you're at the high end, you don't want your customers to think of your competitors as being in the same league. Often you'll benefit more if you can frame yourself as being in your own category. You're not competing with Amazon, you're a boutique that happens to sell online.

This perspective can align your product roadmap and help you push out your competitors if you can find an angle that your competitors aren't working. Sometimes this means selling to a different department -- Marketing instead of I.T., for example, or Professors instead of a school's Administration. Sometimes it means you and a competitor might have the same customer. If you're doing a good job, maybe your competitors will start chasing you.

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