What if every time a customer accepts your price without hesitation, you're actually losing?
Clio, the legal practice management platform, nearly collapsed in 2008 when they priced like every other startup: low, hoping volume would save them. The founder reversed course, raised prices forty percent, and discovered something counterintuitive. Higher-paying clients churned less because they'd invested enough to actually use the product.
The instinct to price low comes from fear. Fear that you'll lose the deal. Fear that competitors will undercut you. Fear that your product isn't worth more. But that fear creates a self-fulfilling prophecy. Low prices attract customers who treat your solution as disposable. They churn. They complain. They demand discounts on already-discounted pricing.
Dan Balcauski, who runs Product Tranquility and teaches pricing to executives at Kellogg, frames it this way: your pricing is a function of your positioning. Get the positioning wrong, and no amount of spreadsheet optimization will save you.
Consider the economics of water. Dasani sells at about one cent per ounce. Avion sells at three cents, a three-times premium for essentially the same product. But Avion also created an aerosol facial spray, water and compressed air marketed to women who want to keep their makeup fresh. They sell that at a fifteen-hundred-times markup over their own bottled water.
Same atoms. Different use case. Different price.
This is the shift founders need to make. You're not pricing your product. You're pricing the context in which your customer encounters it. A thirsty traveler at a gas station pays three dollars for water. Someone wandering the Mojave for a week pays whatever you ask. Someone with pipes bursting in their bathroom has water with negative value.
The practical implication: if nobody pushes back on your pricing, you're too cheap. That instant "give me the paperwork today" response that feels like a win? It's the market telling you that you missed by a wide margin. Healthy pricing creates healthy friction. It signals that you've matched value to price correctly.
The question isn't what your product costs to make. It's what situation your customer sits in when they find you, and what your price teaches them about the category you occupy.
Watch the Full Episode on Pricing Strategy with expert Dan Balcauski below:
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