Start with Premium Customers
Problem: Starting with customers who have low budgets makes it hard to appropriately price your product. Even if they use your service regularly, you won’t know how valuable it is to budget customers, because they can’t pay.
Solution: Initially, you should focus on premium customers. Premium customers are those with the most spending power for your customer profile and will often expect personal service. Usually it’s easier to test pricing in a premium customer base, as you need to talk to less people to get a representative sample. This was the approach taken by Uber — they started with a black car service priced ~25% above standard taxi fares. It would be years before they launched their budget service: UberX.
Use the Wince Test
Problem: Most entrepreneurs are afraid of hearing ‘no’ from a customer and set an artificially low price in an attempt to guarantee a ‘yes’. Given a customer won’t suggest paying a higher price, offering a low price sets you up for further downward pricing pressure.
Solution: Take whatever price you get from your market research and triple it. Setting an artificially high price, then waiting for the customer to wince (ie reject the price), forces an interested customer to negotiate it down. Each negotiation down will get you closer to the maximum price you can expect to charge, whereas always getting a ‘yes’ will not tell you if you could charge more. When Marc Andreessen was asked in 2016 for his advice to struggling startups he said 2 words: Raise Prices.