Turn Interest Into Paid
Price against alternatives, not rivals
You benchmark your price against your direct competitors — the other shops just like yours. But your customer isn't only choosing between you and them; they're weighing you against every other way to spend that money. Price against the rivals alone and you miss where the real crowd is.
Pricing only against your direct rivals keeps you trapped in a tiny reference frame. You end up in a narrow price war with the shop next door, while the far bigger group of people choosing between your category and a completely different alternative never even enters your thinking.
Price from the outside in. Map the alternatives your buyers really weigh — not just direct rivals, but different products that do the same job and different things that meet the same objective — then find the price band that holds the biggest crowd. That's your corridor. Set your target price there first, and if you're easy to copy, aim low in the corridor to lock rivals out.
In the early 1980s, cheap high-precision quartz watches from Japan and Hong Kong (around $75) were taking the mass market. Rather than price its watch against those rivals, Swatch chairman Nicolas Hayek fixed the price first — $40, low enough to buy several as fashion accessories — and forbade going 'a penny more.' Only then did engineers work backward to the cost.
→ To hit that sacred price and still profit, they switched metal for plastic, cut the parts from 150 to 51, and welded cases instead of screwing them — landing a cost structure about 30% below any rival. The rock-bottom price left copycats no margin to undercut, doubling as a moat. (Ford did the same pricing the Model T against the horse; Southwest against the cost of driving.)
The honest caveat: price-minus only works if you can genuinely re-engineer your costs to fit. Fix a low price you can't actually deliver profitably, and you've locked yourself into selling at a loss — a target price is a discipline, not a magic wand.
- Utility: confirm buyers get exceptional value — a reason to switch to you at all.
- Price: find the corridor of the mass and set a strategic price inside it — the price that pulls the crowd.
- Cost: work backward — can you build it at a profit under that price? Re-engineer until you can.
- Adoption: clear the hurdles — partners, suppliers, habits — that could block the rollout.
Instead of costing your product at 70 and marking up to 100, ask what the mass of buyers will happily pay against all their options — say 80 pulls a far bigger crowd. Now work backward: can you deliver it for 55 and profit at 80? Redesign until you can.
List every alternative your customer weighs — direct rivals, different products that do the same job, and doing nothing — with the price of each. Find the band holding the biggest group; that's your corridor. Pick your target price there, then figure out the cost to make it work.
Price against every alternative your buyer weighs, not just your direct rivals. Fix the strategic price that pulls the mass first, then engineer your cost to fit it — price-minus, never cost-plus — and go low in the corridor if you're easy to copy.
Turn Interest Into Paid