Please don’t confuse price , cost and value !
Entrepreneurs are focused on pricing – how much they charge for their product , but they forget there is a big difference between price and cost . The price is the sticker price – how much you sell your your product for – for example, its MRP or, maximum retail price . This is in your control, and entrepreneurs take pride in boasting about how much cheaper their product is, as compared to the competition. They are often happy to give a discount as well, because they are desperate to sell, and believe that all customers care about is a low price . However, this is flawed reasoning .
While superficially it may seem that a low price is attractive , there’s a big difference between your price your charge and the customer’s cost. Normally, these two terms are used interchangeably , but the customer’s cost is not just how much they pay for your product , but the additional cost of learning to use your product . The switching costs, on-boarding and training costs, as well as the opportunity costs are often much more expensive than the actual sticker price !
And at the end of the day, a purchase is never just a financial transaction . If your product adds enough value, your customers will not quibble over how much you charge for it. And if it doesn’t add value, then you need to go back to the drawing board !
So while you determine the price of your offering , it’s the customer who knows the cost they have to pay, and the value they extract from it !