Beyond the Numbers: Navigating Startup Pricing with Strategy and Soul by AVR Mahadev
When it comes to pricing, startups often default to a purely financial mindset—calculating costs, adding a margin, and arriving at a number. But as Dr. AVR Mahadev emphasized in a recent session on “Startup Pricing: Strategy and Customer Relationships,” effective pricing goes far beyond spreadsheets and profit margins. It’s a deep strategic decision rooted in positioning, brand promises, and long-term customer relationships.
Pricing is not just a number—it’s a reflection of how you value your offering, how you communicate it, and what you expect in return.
Pricing Starts with Positioning
The foundation of startup pricing lies in understanding your positioning:
“What is your offering, and how do you want people to identify you?”
It’s not about listing features; it’s about defining the emotional and functional space you occupy in the minds of your customers. Think of it like Maggie’s tagline. It evokes joy and comfort—not ingredients or nutritional value.
This is where startups have a unique advantage: freedom. Unlike legacy businesses tied down by history, startups can define how they want to be remembered, what kind of relationships they want with their customers, and how they want to communicate their value. As Dr. Mahadev puts it:
“A startup is one of the most luxurious things that anyone can have in their life—you are free to choose what you want from the people who are interacting with you.”
Redefining Price: More Than Just Money
Price is not simply a cost tag—it’s a sum of values. As Dr. Mahadev explains:
“Price is the sum of the values that consumers exchange for the benefits of having or using the product or service.”
This value can be monetary, emotional, or relational. A transparent soap like Pears doesn’t just sell cleanliness—it sells nostalgia, gentleness, and emotional connection. Your pricing, therefore, must reflect what you are asking from your customers in return—whether that’s money, trust, or brand loyalty.
Every promise you make—be it “fresh,” “on-time,” or “healthy”—becomes a primary responsibility. And those promises become the emotional basis on which customers evaluate price.
Pricing Decisions: Balancing Internal and External Factors
Pricing isn’t decided in a vacuum. It’s shaped by a combination of internal capabilities and external realities.
Internal Factors
- Marketing Objectives:
Are you aiming for survival, rapid market share, profitability, or brand leadership? Each goal shapes how aggressive or value-driven your pricing strategy should be.- Example: Jio focused on market penetration, offering ultra-low prices to displace competitors like Airtel. Airtel, in contrast, held firm on premium pricing to signal commitment and quality.
- Organizational Capabilities:
Can you reliably deliver on your promises at your chosen price point? A breakfast delivery startup planning for 50 orders but receiving 180 failed to meet demand with just five delivery executives. Their inability to deliver on time undermined trust—regardless of the ₹60 price tag. - Marketing Mix Costs:
Your pricing must absorb the cost of advertising, distribution, and partnerships. Some companies prefer non-price positioning, choosing not to compete on price but on value and relationships.
External Factors
- Operational Costs:
Inputs like wages or fuel prices can force pricing changes. These often sit at the border of internal planning and external volatility. - Market Demand:
Sudden spikes in demand—like the breakfast startup experienced—can quickly outpace your operational setup, requiring swift adaptation. - Competition:
The importance of competitors depends on your customer relationship. As Dr. Mahadev notes: “If you are strong with your relationships, competition does not matter.” Johnson & Johnson ear buds dominate despite similar alternatives because of strong branding and emotional resonance: “Ears meet Johnson.” - Regulations and Economy:
Government policy changes, taxation, or economic slowdowns can affect your input costs and demand forecasts. - Substitutes:
Disruptive alternatives, such as AI-powered solutions replacing human services, can shift value perceptions and force re-pricing.
The Price of Broken Promises
One of the most powerful lessons from the session comes from the breakfast delivery example. Initially thriving with 180 daily orders at ₹60 per meal, the service failed to deliver on time—breaking the promise of convenience and reliability. The fallout?
- Orders dropped to just 40.
- Customers left not because of the price, but because of a breach of trust.
This illustrates a key truth:
“Even if he had increased the price to ₹80 or ₹100, the damage wouldn’t have been as great as breaking the promise.”
Price can be changed at will—but a damaged relationship takes far longer to repair. It requires rebuilding credibility, trust, and emotional connection.
Pricing as a Strategic Tool
Price is one of the most flexible levers available to a startup—and the only element of the marketing mix that directly generates revenue. But flexibility must be used wisely. It is not just a tactical decision, but a strategic one.
Startups that succeed at pricing:
- Align pricing with their value proposition and brand promise
- Understand the emotional and relational expectations of their customers
- Build operations that can consistently deliver on their commitments
- Focus on customer lifetime value, not just initial acquisition
Final Thoughts: Make the Price Worth It
Your price communicates more than a cost—it communicates intent, reliability, and respect. If your promise is strong and your delivery is consistent, customers will pay more for the peace of mind you offer.
Pricing should be viewed not as a math problem but as a relationship strategy. It’s the bridge between your value and your customer’s trust.
As a startup founder, ask yourself not “What should I charge?” but rather:
“What value do I promise, and how will I uphold that promise every single day?”
That’s the true foundation of sustainable, strategic pricing.