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A young founder sat across from me, confidently explaining how he planned to dominate his market.
“Our pricing strategy is simple,” he said with a grin. “We’re going to be way cheaper than everyone else.”
I nodded, taking a sip of my drink.
“And why do you think that’s a good idea?” I asked, genuinely curious.
He looked at me like I had just asked why water was wet.
“Because people love a good deal. If we’re the cheapest option, they’ll obviously pick us.”
I sighed. I’d heard this exact argument too many times to count.
In fact, I’d made the same mistake in my early days of building startups.
“I get your logic,” I told him, leaning forward. “But what if I told you that pricing your product too low is one of the fastest ways to kill your startup?”
His skeptical expression told me everything I needed to know.
So, I explained.
💡 Low Prices Don’t Always Mean More Customers
It’s a common belief among new founders that low prices automatically attract more customers. And sometimes, that’s true — if you’re selling a commodity where price is the only differentiator.
But for most startups?
That’s rarely the case.
In fact, pricing too low often creates an entirely different set of problems that can strangle your business before it even gets off the ground.
🚨 The Hidden Dangers of Low Pricing
1. Low Prices Make Your Product Look Cheap
Customers naturally associate price with value.
If your product is significantly cheaper than your competitors, potential customers won’t think,
“Wow, this is a steal!”
They’ll think,
“What’s wrong with it?”
They’ll assume your product lacks quality, features, or reliability. And once that perception takes hold, it’s almost impossible to shake.
✅ Example:
Imagine two online courses teaching the same skill. One costs $30, while the other costs $300.
Even if the cheaper course is just as good (or better), most people will assume the more expensive course is higher quality.
Perception matters.
2. Low Prices Attract the Wrong Customers
When you price too low, you don’t attract loyal, high-value customers.
You attract bargain hunters.
These are the customers who:
- Care only about price, not value.
- Have zero brand loyalty.
- Will leave the second they find something cheaper.
✅ Example:
A SaaS founder I worked with slashed his prices to attract more customers. It worked — but only temporarily.
His churn rate skyrocketed because those customers didn’t stick around. They weren’t invested in the product. They just wanted a deal.
3. Low Prices Make It Impossible to Scale
If your margins are razor-thin, growth becomes an uphill battle.
- Marketing? You can’t afford it.
- Customer Support? Barely sustainable.
- Product Improvements? Forget about it.
When you underprice, you leave no room to reinvest in your business.
✅ Example:
Another founder I mentored offered her software at a rock-bottom price to gain traction. She got customers, but the revenue was so low that she couldn’t afford the marketing needed to scale.
Low prices trap you in survival mode.
🎯 Pricing is a Message — Make Sure You’re Sending the Right One
A price tag isn’t just a number.
It’s a signal.
- It tells customers what to expect.
- It reflects the value they’ll receive.
- It shapes how they perceive your brand.
Price too low, and you’re telling the world that your product isn’t worth much.
🔥 The Right Way to Approach Pricing
So, if pricing too low is a mistake, how should founders approach pricing instead?
Here’s how smart entrepreneurs get it right:
1. Focus on Value, Not Price
Ask yourself:
✅ What problems am I solving?
✅ How much time or money am I saving my customers?
✅ What outcomes are my customers achieving because of my product?
Price your product based on the value you deliver, not how low you can go.
2. Anchor Your Price to a Higher Perceived Value
Don’t just set a price. Create a narrative around it.
Highlight:
🎯 The expertise behind your product.
🎯 The premium support you offer.
🎯 The long-term results customers can expect.
When customers see the value, they’ll be far more willing to pay.
3. Test and Iterate Your Pricing
Pricing isn’t a one-and-done decision.
It’s an ongoing process.
✅ Test different price points.
✅ Experiment with premium tiers.
✅ Collect feedback and adjust as needed.
Pricing is part science, part art. Treat it that way.
4. Don’t Be Afraid to Charge What You’re Worth
The biggest mistake new founders make?
Being afraid to charge what they’re worth.
If you’re delivering real value, don’t be afraid to price accordingly.
Customers who recognize that value will stick around — and they’ll be happy to pay for it.
💸 Final Thoughts: Pricing is a Growth Lever, Not a Race to the Bottom
Underpricing might feel like a safe bet, but in reality, it’s a dangerous trap.
Cheap prices bring cheap customers.
Cheap customers drain resources and hinder growth.
Smart founders don’t compete on price. They compete on value.
So, the next time you’re tempted to drop your prices to win more customers, ask yourself:
“Am I attracting the right customers, or just the cheapest ones?”
Because in the end, pricing for value, not volume, is what builds a sustainable business. 💡🚀
