If you’re a product-oriented founder like me, you probably get a little nervous when you get to the pricing conversation during a product pitch. You’d rather defer this conversation to later (like after a pilot) or to someone else.
Deferring this conversation only delays testing one of the riskiest assumptions that can make or break your business model. Also, no one is better equipped than yourself to drive initial founder-led sales.
Counter-intuitive insight: Founder-led sales, when done well following a problem/solution fit process, are the highest converting type of sales.
The key to overcoming pricing anxiety is recognizing that it is possible to make a rational case for your pricing model. It is possible to go from dreading pricing conversations to even looking forward to them.
In today's issue, I’ll show you how.
The key to making a rational case for your pricing model starts with determining a “fair” price for your product.
When you pull pricing out of thin air, it’s normal for people to get emotional.
It’s also important not to confuse “fair” price with “optimal” price. You aren’t trying to optimize your pricing model at this stage — a good enough ballpark will do.
The fair ballpark price for your product sits somewhere between two anchors:
- the cost of how the job is being done today (with existing alternatives), and
- the value your product helps the customer realize.
Understanding the cost of how the job is being done today is where discovery comes in. This should ideally be done before pitching your pricing.
See this post for more on when and how to set fair pricing.
The critical next step is getting the customer to “own” these anchors before you share your pricing model.
When they do, they emotionally buy your product. By the time you get to the pricing slide, all the heavy lifting has already been done. And, all that’s left is summarizing what you’ve learned and getting them to rationally buy your product.
Here are the steps:
- Break their old way (emotional buy #1)
- Demo your new way (emotional buy #2)
- Share your pricing model (rational buy)
Let’s dive in.
1. Break their old way (emotional buy #1)
All purchases are switching stories from an old way to a new way. And before you can sell your new way, you have to break their old way. Too many founders skip this step because they incorrectly assume that customers will make the right comparison. They often don’t.
You have to do this explicitly.
How you do this varies on whether this is an inbound/outbound lead and whether you’re pitching online or on a sales call.
To keep the steps specific, I’ll assume you’re on a sales call with an inbound lead.
Start your pitch by
- Reviewing their high-level business problem (ask why they’re here),
- Identify their existing alternative (ask how they currently do the job)
Then trigger them for switch by
- Asking them about the root causes underlying their business problem,
- Suggest one more underlying problems with their old way that’s keeping them from achieving better outcomes (root causes you should have discovered earlier that you can solve),
- Seek acknowledgment, then
- Quantify the negative impact of these problems and/or lackluster outcomes (cost of old way), and
- Tease a better desired outcome (value of your solution).
If you get them nodding their head here, you’ve established the anchors for your pricing model to fit into later. This is emotional buy #1.
2. Demo your new way (emotional buy #2)
Now that you’ve earned their interest, the next step is earning their trust. This is where you walk through a carefully scripted demo that shows
- how your solution solves their root problems exactly,
- how they’ll avoid the negative impact of the old way, and
- achieve the desired outcome you teased earlier.
At the end of your demo, ask them how your new way compares to their old way.
If they acknowledge the value of your new way, you’ve just got past emotional buy #2.
3. Share your pricing model (rational buy)
With all the heavy lifting already done, share your pricing model by recapping
- their old way and the cost of using the old way (negative impact anchor),
- how your new way helps them achieve a better desired outcome (value anchor), and
- Rationalize how you determined your fair pricing model.
Finally, share next steps that reduce anxiety and friction in getting started with your new way.
Bonus Tip: Guage how easily they agree to your pricing model. If too easily, that’s often a cue to raise pricing — a highly underutilized lever.
Disclaimer: Your success with this method is directly proportional to the quality of your customer/problem discovery. When you deeply understand your customers better than they do, it grants you superpowers. The opposite is true too.
