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How to charge customers 10x for your startup’s offering

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Shreya has been with londonbusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider londonbusinessblog.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Most business books on Amazon, including the life lessons of some of history’s most successful businessmen, cost between $10 and $20.

At the same time, online courses on a similar subject from much less prominent experts successfully sell for up to 100x the price.

How is this possible, when the difficulty of producing both products and their offerings (learning about things from people with experience) are nearly identical?

Pricing your product as an early stage startup is one of the most important, but not intuitive and difficult things to do. In this article, we want to give you an important insight that will help you tackle this problem.

There are a few key differences between the business books and courses from the above example that cause this anomaly.

The most important thing that determines how customers experience your pricing is undoubtedly how it compares to the pricing of comparable offers. So if they see that your course offers the exact same value as a business book, they would find it hard to pay 100x the price as there are plenty of alternatives.

The key is differentiation. So, to justify the higher price, courses went the extra mile to differentiate themselves from a business book.

First, business books are often mass-market oriented and try to incorporate general, evergreen advice. Courses usually try to address specific market niches and highlight the latest trends and strategies.

So while the market they target is much smaller (and even temporary), the alternative offerings are very scarce and solve a specific pain point.

For potential buyers, the course is not a personal development tool – hence a personal expense, they are an attempt to gain a competitive advantage – and thus a business expense. This makes it much easier to justify a higher price.

Second, to differentiate from regular books, courses have different functions. Videos, opportunities for interaction (closed communities, sessions with the author), etc. Even if the final offer is the same (knowledge), the additional features help potential customers see the course as more valuable and fundamentally different, which the comparison with books does not relevant. They are removed from the equation as a price anchor.

Third, courses are usually sold by people with an existing following – influencers in a specific niche. So when people buy their course, they experience it as unique. They don’t choose one of the many corporate courses. They buy the course created by the specific person they are interested in, and for that product there are zero alternatives.

Building a startup by definition means offering a somewhat unique offering – startups are all about innovation. This means that you can intentionally use all three tactics above to differentiate your offering as much as possible from the alternatives available to your target market.

Last but not least, customers don’t care how much it costs the company to produce the product – their purchasing decisions are dominated by their perception of the value they could get from the product in the context of comparable offers.

One of the best examples to illustrate this point is that of Peter Reinhardt, founder of Segment. In the early startup phase, Segment offered its service for free – they came from an open-source mindset. To generate revenue, they increased the price to $10 per month.

Later, their sales consultant Mitch Morando noticed that what they’re selling is a business solution, so he forced Reinhardt to charge their next client for $120,000 a year. They struck a deal for $18,000 a year — a price 150x higher than the team previously thought fair. Over the next six months, they were able to close deals up to $240k a year.

Segment’s team underestimated the uniqueness of their offering, the value it provided to their customers, and the purchasing power of the aforementioned corporate customers. The actual cost of providing the offering and the low cost of other SaaS solutions were totally irrelevant.

So as a startup founder, you need to leverage the uniqueness of your offering and showcase it as much as possible when trying to sell. If you differentiate yourself enough and your offer is really valuable, you could charge much higher prices. The ability to do this can be the difference between financial success and failure, especially if you work in a small niche.

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