How to Price Something When No One Has Ever Bought It Before
The price you set for your first product is one of the most consequential decisions you will make as a founder. Most get it wrong in the same direction too low for the same reason fear. Here is how to get it right.
The pricing conversation is the one that most startup founders dread. Not because pricing is technically complex the mathematics are simple. Because pricing feels like an exposure. It is the moment when the abstraction of an idea meets the concrete reality of what someone is actually willing to pay. And if nobody is willing to pay what you ask, the implication feels personal.
This fear of exposure drives the most common pricing mistake in early-stage startups: setting the price too low. Not just slightly below market dramatically below it, in some cases approaching zero, in an attempt to remove price as a barrier and let the product quality speak for itself.
This logic is seductive and consistently wrong. Price is not just a number. It is a signal. It communicates something about the value of what is being offered, about the confidence of the person offering it, and about the type of customer the product is designed to serve. A price that is too low does not remove the barrier. It replaces one barrier is this worth the price with a different, more damaging one: if it is this cheap, what is wrong with it?
Why Pricing Is Different When Nobody Has Bought Before
Established businesses price by anchoring to market rates, historical conversion data, and competitor benchmarks. None of these are available to a startup with no sales history and a product that may not have direct comparators.
This is not a disadvantage. It is an opportunity. The founder of a new product is not constrained by what previous versions of the product charged. They are not bound by industry norms that may have been set by businesses with very different cost structures or very different target customers. They have the freedom to price based on value the value the product creates for the customer rather than based on precedent.
Value-based pricing is the most appropriate framework for a startup with a new product, because it starts from the right question. Not how much does this cost to produce, or what are competitors charging, or what price will close the most leads but what is this outcome worth to the customer who most needs it?
| The right price for a new product is not the price that closes the most deals. It is the price that attracts the right customers, at a margin that makes the business sustainable, while communicating the genuine value of the outcome being delivered. |
The Four Pricing Frameworks Available to Startup Founders
Framework 1 – Value-based pricing (recommended for most startups)
Value-based pricing begins with the question: what is the quantifiable value this product creates for the customer? If your product saves a business ten hours per week and the average cost of that time is AED 200 per hour, the weekly value is AED 2,000. A monthly subscription at AED 500 represents a twenty-five percent return on value delivered a ratio that is easy for the customer to accept and produces a sustainable margin for the business.
The discipline of value-based pricing forces the founder to understand the customer’s world before setting the price. It requires conversations asking customers to quantify what the problem costs them, what the current imperfect solution costs them, and what a better outcome would be worth in measurable terms. These conversations are more valuable than the pricing decision they inform.
Framework 2 – Comparable pricing (useful when direct comparators exist)
When the customer is currently spending money on an imperfect solution to the same problem, the price of that solution is a useful reference point. If businesses in the target market are currently paying AED 3,000 per month for a manual process or a generic tool that imperfectly solves their problem, a purpose built solution that solves it better can be priced at or above that reference point not below it.
Pricing above or at the current imperfect solution requires clarity about the improvement in outcome. The more specific and quantifiable the improvement, the more defensible the higher price. I cannot articulate specifically what is better is not sufficient. We reduce the time to outcome from six weeks to ten days, with a documented accuracy improvement of thirty percent this is a price anchor.
Framework 3 – Cost plus pricing (useful as a floor, dangerous as a ceiling)
Cost-plus pricing calculates what it costs to deliver the product or service and adds a margin. This is useful as a check the price should be at or above the cost-plus floor, or the business is not sustainable. It is dangerous as a ceiling the customer does not care what it costs to produce the solution. They care what the outcome is worth to them. A product that costs AED 100 to deliver and creates AED 10,000 of value should not be priced at AED 150 because the cost structure demands it.
Framework 4 – Experimental pricing (for genuine uncertainty)
When none of the above frameworks produce a clear number, the most honest approach is to treat the price as a variable in an experiment. Offer the product at a price, observe the conversion rate, and adjust. Not indefinitely with a specific hypothesis and a specific timeline. If the conversion rate at AED 500 per month is acceptable, test AED 800. If conversion holds, the price can move higher. If it drops significantly, the AED 500 level was closer to the value ceiling.
Experimental pricing requires the willingness to raise prices deliberately which is psychologically difficult for founders who fear losing the customers they have worked so hard to acquire. The data from the experiment is more valuable than the discomfort of the process.
The Most Common Pricing Mistakes in Early Stage Startups
Mistake 1 – Pricing to close, not to sustain
The pressure of the first few months pushes many founders to set a price that maximises the probability of closing each individual sale rather than the price that makes the business model sustainable over time. This produces a business with customers but no margin a state that is very difficult to escape because raising prices on existing customers is significantly harder than setting the right price from the beginning.
Mistake 2 – Offering too many pricing tiers
Multiple pricing tiers feel like flexibility. For a startup with a new product and limited data about customer willingness to pay, they are a source of confusion and unnecessary complexity. The customer who must choose between three tiers makes a slower decision than the customer presented with one clear offering. One price, one clear value proposition, one simple decision this is the structure that closes fastest at the earliest stage.
Mistake 3 – Discounting in the first conversation
The founder who offers a discount before the customer asks for one communicates that the original price was not real. This single behaviour, in the first pricing conversation, sets a precedent that is very difficult to reverse. State the price with confidence. Wait. If the customer asks for a discount, discuss scope before discussing price. A smaller scope at the full price is almost always preferable to the full scope at a reduced price.
Mistake 4 – Not raising prices as the product improves
The product that launches at AED 200 per month and is still at AED 200 per month eighteen months later despite significant improvements in capability and outcome has developed a pricing ceiling that the early customer base has set. The right time to raise prices is when a meaningful improvement in value has been delivered. Regular, small price increases tied to product improvements are significantly easier to execute than a single large price increase after years of the same rate.
The Conversation That Sets the Right Price
The most reliable route to the right first price is a specific conversation with ten potential customers not existing customers who are already anchored to an expectation, but new prospects who have not yet formed a view.
In each conversation, after establishing the problem and the solution, ask one question directly: if this solution existed today and delivered exactly the outcome we have discussed, what would you expect to pay for it per month? Listen. Do not anchor them with a number first. Record what they say.
Across ten conversations, a distribution will emerge. Some will name a number that is lower than your intended price. Some will name a number that is higher. The majority will cluster around a range. That range is your market’s price expectation the number they will pay without significant resistance. Your price should be at or above the midpoint of that range, positioned to the high end if the value evidence is strong.
The founder who has had this conversation ten times knows more about their market’s pricing than any consultant or advisor can tell them. The conversation is the data. The data is the price.
Frequently Asked Questions
Should I offer a free tier to get early traction?
A free tier can accelerate adoption but almost never converts to paid at the rate founders expect. If you use a free tier, design it with an explicit and imminent conversion trigger a feature, a volume limit, or a time boundary that makes the paid tier necessary for the customer to continue getting value. A free tier with no natural conversion trigger produces a large base of free users and very few paying customers.
My competitors are charging significantly less than I intend to. Should I match their price?
Only if they are serving exactly the same customer with exactly the same outcome. If your solution delivers a meaningfully better outcome more accurately, more quickly, with less effort from the customer a higher price is defensible and often preferable. The customers who choose primarily on price are not the customers who will become long-term, high value relationships. The customers who choose on outcome will pay more for the better outcome.
What is the minimum price I should charge for a professional service or consulting engagement?
This depends on the market and the outcome, but as a general principle: if your price does not make you slightly uncomfortable, it is probably too low. The right price for a professional service is one that reflects the value of the outcome clearly enough that the client considers it an investment rather than an expense. In the GCC professional services market, rates below AED 5,000 per day for senior advisory work are typically under-pricing the market significantly.
How do I handle a potential customer who says they cannot afford my price?
Explore whether it is a budget constraint or a value gap. A budget constraint is a practical limitation the customer values the outcome but does not have access to the funds. A value gap is a communication failure the customer has not understood the outcome clearly enough to justify the investment. These require different responses. A budget constraint may be addressed by scope reduction. A value gap requires clearer articulation of the value before any price discussion.
At what point should I formalise my pricing into a public price list?
When the pricing is stable enough that the last ten customers have all paid within a similar range without significant negotiation. Before that point, pricing is still experimental and a public price list creates an anchor that may be premature. Once the price is stable, a clear public price list signals confidence and professionalism and eliminates the time spent in price negotiation for every new prospect.
| Ready to build with clarity from day one? Book a free 30 minute Founder Clarity Call with Anubhav Bharadwaaj. www.aydeebee.com | grow@aydeebee.com |
| About the Author Anubhav Bharadwaaj Business Coach & Strategic Consultant | Dubai, UAE Anubhav Bharadwaaj is a Dubai based entrepreneur, business coach, and institutional mentor. Founder of Aydeebee, a strategic consulting platform helping founders at every stage across the UAE, GCC, and Asia. Author of The Founder’s Code series. |
