If you're the founder of a startup, it's tempting to offer your product or service for free to get initial traction. In general, that's a bad idea - which is why I advise founders to focus on getting paying customers as soon as possible.
But you'll encounter resistance once you ask prospects to part with their money. People who just told you how much they love your idea, and how great it would be to have such a thing as yours suddenly become much less enthusiastic about your product when you ask for cold hard cash.
You Need to Fully Commit. Don't Back Down.
I run into this all the time: a founder hesitantly embraces the idea of charging money to validate a business idea. But once a couple of prospective customers don't buy, they flinch, squinch, and retreat.
"Oh, maybe charging money this early was a bad idea after all," the deflated founder tells himself, rationalizing his withdrawal. "I should just offer our product/service for free, get a foothold in the market, prove that I can provide real value, and then we can start making money."
How to Catch 'Charge-O-Phobia'
At a recent Lean Startup Conference a fellow speaker told me how an initially enthusiastic prospect turned cold once she revealed their price tag.
The price is too high, the prospect said, thank you very much, but no, goodbye.
She tried to win the prospect back, assuring their price would be negotiable and that she'd be willing to make substantial concessions to reach an agreement.
But the client refused to re-engage in the conversation. "You may contact us again next year," he cut her off.
Dispirited, our founder developed what can almost be called a phobia of charging money. She had pinned high hopes on that particular prospect; everything seemed to be going well... until she had asked for money.
Stop Chasing Unicorns
If a prospect cuts off the conversation just because an initially quoted price was too high, that prospect never had any sincere buying intent.
This is exactly why you often want to ask for the money early and often. Because some prospects will lead you to believe they love and want your product... and yet would never buy it.
What should you do when an initially enthusiastic prospect turns cold once you quote your price?
Find out why they think your offer isn't worth it. Ask a lot of follow-up questions to uncover the real reasons. It's almost never price!
Why don't they want to pay your price?
How much would they want to pay? What number did they have in mind?
How much would this be worth to them?
What would you have to offer to make them want to pay your price?
Not Getting Real Answers?
If you feel the prospect isn't being fully honest with you, bring it up:
"This is hard for me to understand. Help me out here. What am I not getting right? It seemed like you were really interested, and our solution is the perfect fit for you, and I'm open to hear the price you had in mind to make this work. Help me understand how we can move the conversation forward. What am I missing here?"
Resist Price Pressure
It's always tempting to lower your prices, but that's rarely the right answer.
What do you want to be worth? That's what you should be charging! You can't build a sustainable business with commodity pricing. Instead, go with 20/60/20 pricing.
All too often founders don't charge enough money because they lack confidence. They want to avoid asking themselves an uncomfortable, but fundamental question: "Did we convince them of the value our product/service creates for them?"
Further reading:
Your SaaS product is too cheap if you never lose customers because of pricing
Dare to charge more and then live up to the challenge. It’s not about becoming so affordable that everybody can get some value out of you, it’s about creating so much value that the right customers are happy to pay you a fair price in exchange.
How to manage the pricing objection in sales?
If a prospect tells you your price is too high, never just accept that answer at face value. Here's how to uncover what's hidden behind "too expensive."
Slay the feature creep monster
Sometimes when you ask prospects what it takes to get them to buy, they'll tell you about features your product is missing. It's important to not just blindly follow these feature requests, but instead carefully discriminate what to implement,a nd what not.
