Q

Should a startup drop prices? We have just launched our brand. Not much of the PR was done because of funding crunch, and we couldn’t excite our users about our launch. We are receiving an overwhelming response in terms of our concept and brand impact. But our very first users are telling us to drop prices in order to be able to come back. We are in a sort of monopoly right now, in baby wellness sector, working on a brick and mortar model. Should we slash our prices right now or wait? But if we lower it down it wouldn’t go with our branding, which is very premium.


A
Answered by Meeta Malhotra

Drop prices or stay firm? This is tough and often-asked question. I am assuming that you worked out your prices carefully, based on:

  • Business model-related factors like input costs and margins
  • Brand-related factors like positioning and competition

I understand that there is a fund crunch and therefore there is great pressure to make the business work quickly. But let’s ask a completely different question. Why do you want to drop prices?

Are you genuinely questioning your business model OR are you just anxious that your early users will not come back to buy? Be super-clear about the difference.

If it is the latter, the number of users who are ‘telling you to slash prices’ cannot be too significant, since you have just launched. Therefore, you cannot make a decision based on what they say. There are a number of other things you could try to retain them. For example, loyalty coupons, referral bonuses, free samples, etc.

On the other hand, if you feel that the early market feedback means you should revisit your whole business model, then do it carefully. There is a whole spectrum from mass to premium and you have to decide where you want to sit. Taking apparel as an example, do you want to be like an unbranded local market or Big Bazaar or Westside or Zara or Gucci. Each one of these follows a different price /premium model. You cannot slash prices in isolation. Your brand is much more than that. Think about the big picture before taking any action.

All the very best!

 

 

 

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