founders paras chopra, chapter by chapter
31. Price Is Set by Perceived Alternatives
Customers judge price by the category in their head, not by your estimate of value created.
People rarely know an objective price for a product. They anchor on the alternatives they believe it resembles, while price itself signals which category and quality tier to use. This is why a cheaper offer can reduce trust and why a valuable information product may struggle when compared with free articles.
Identify the comparison set in the customer’s mind before setting price. Position the product so the right alternatives become salient—consulting rather than a report, for example—then charge within the expectations of that category. Pricing and positioning are one decision, not two.
Original sketch and model by Paras Chopra. Read the source chapter.