I’m sure we have all heard of that fraud where tourists walk into a restaurant, order some basic food item-dosa, idli kind of thing-and are presented with a bill for thousands at the end of it. And the swindlers at the restaurant claim that the tourists should have checked the prices on the menu before ordering. I can’t say for sure if such scams have taken place, but such stories certainly do the rounds once in awhile.
If such a situation happened for real, would you say the tourists are at fault for not checking the prices beforehand? Certainly not. As a society, we have a cultural perception that price is fixed-more or less. When you go to a supermarket and buy some biscuits, the packet comes marked with a maximum retail price (MRP) so you clearly know how much you should be paying for it.
This applies not just to tangible goods, but also in the case of services. If you go a salon for a haircut, you have a general idea of how much you will end up paying.You may not always know the exact figure, but you have a general expectation regarding how much a service should cost.
However, this system works only if you are selling a new brand of an existing product or service. If you started selling a new brand of socks, you would know how much to charge for them mainly because you can refer to the prices of socks from other brands.
If you are running a startup, however, this easy system of figuring out how to price your products or services rarely works. The reason being that a startup by definition is trying to sell a product or service that is brand new, and has not existed before. Consider Dropbox. People carried around USB drives and CDs for their data, and shared files using email attachments.
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