Page 156 - The $100 Startup_ Reinvent the Way You Make a Living, Do What You Love

much.
When you base your pricing on the benefits you provide, be prepared to stand

your ground, because some people will always complain about the price being
too high no matter what it is. Almost none of the people I met with talked about
thriving in their new businesses because they always offered the lowest price.
What works for Walmart probably won’t work for you or me. Very few
businesses will succeed on the basis of such a cutthroat strategy; that’s why
competing on value is so much better.‡

Gary Leff, the frequent flyer guy who helps busy people book their vacations,
charges a flat rate for the service ($250 at press time). Sometimes it takes him a
fair amount of work to research and book the trip, but other times he gets lucky
and it can take as little as two minutes of research and a ten-minute phone call.
Gary knows that the people he’s booking the trip for don’t care whether it takes
ten minutes or two hours; they are paying for his expertise in getting the flights
they want.

Time cost: variable, but averages thirty minutes per booking
Benefit: first-class and business-class tickets for worldwide vacations
Cost: $250 (key point: does not vary based on time)

Tsilli Pines, who makes contemporary Judaic stationery, created a Haggadah
(a booklet used at the Passover meal) that most frequently is sold in bulk. Single
copies are available, but far more people choose a bundle of five or ten.

Materials cost: $3 each
Benefit: nicely designed memento for families to use when observing
Passover
Cost to buyers: $14 each (key point: not directly related to the materials
cost)

We could trace this theme throughout almost every story in the book. Some
examples are even more extreme, especially in information publishing. Every
day, people purchase $1,000+ courses that cost virtually nothing to distribute; all
the costs are in development and initial marketing. When you think about the
price of a new project, ask yourself: “How will this idea improve my customers’
lives, and what is that improvement worth to them?” Then set your price
accordingly, while still being clear that the offer is a great value.