Innovation in pricing models is the path to reach the success in your startup
26th, October 2017 - Startup community
Startups fail everyday because they don’t use the right pricing model for their product or service.
The wrong pricing model can cause a company to lose not only money, but valuable human and trust capital, and ultimately, force the company to shut down.
You need the right pricing model in a startup to survive, but you also need it to remain viable.
Why Pricing Is Crucial To The Success Of Your Startup.
When starting out, you will most likely make mistakes with your pricing model. Everyone does. The equation of What You Do x What You’re Worth can be difficult to crack.
You must evaluate and adjust quickly, because pricing is extremely important to get right early in the game.
A bad pricing model will affect your conversion rates, your sales and cause you to leave money on the table without realizing it.
Select The Right Data To Determine Your Pricing Model
First, there must be an underlying structure for the initial pricing model.
To get the right information, you can talk to other founders or other customers, or your customers and see what they would pay for it.
If they say they were going to pay for something, get them to actually pay for it.
Test your pricing model in the market by validating how much someone is willing to pay for your product or service.
You may be surprised by the results. To deliver the most value, increase and strengthen the product offering, and then proceed to sell it to customers.
The Advantages Of Subscription Based Pricing Models
Subscription based service pricing offers convenience to customers, and also ensures that they will properly integrate you into their workflow.
Recurring clients will get more value, and you get recurring revenue as clients continue to buy from you.
The ideal model involves a product that has marketing vitality and recurring revenue.
However, a pricing model must be fair to the customer while still allowing your company to turn a profit.
You can offer a pricing model that offers affordable packages with additional features available for purchase separately.
Common Mistakes In Pricing
When working with a new pricing model, the common mistakes include misuse of resources and lack of scalability.
Folks often spend too much time doing too much with too little
Entrepreneurs overload the services they offer people, or they undercharge, and spend time trying to prove their worth. To be valuable, you must offer a service the clients actually want or need.
If you have a product that can only be offered to a limited number of people at any given time, nobody wins. If the price points are low and customer demands are high, that’s not going to work either.
Slow growth is an indication of a poor business model rather than failed attempts at customer acquisition. Remember, if you have a steady flow of growing leads, it won’t hurt as much if you don’t have recurring revenue.
A successful business is usually built upon is testing and perfecting its pricing model - don’t be afraid to use the data and make the necessary adjustments to your pricing model as your business grows!
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