Pricing a new product is difficult, but it's not rocket science. It's just one of those tasks where entrepreneurs throw roadblocks into their own way, over and over again.

It's difficult enough to figure out a price point that both delights your customer and generates a profit. When you throw a bunch of extra assumptions into the calculation, like a lot of startup leaders do, you wind up creating some unwieldy arithmetic pretty quickly.

I like math. I don't like when math gets in the way of closing sales. 

I get called in a lot to help startups with their pricing -- either to help set the initial pricing or to fix pricing that isn't working. When I review what they've done, I usually have to untangle a Gordian knot of pre-conditions, assumptions, and expectations that just don't need to be part of the equation. 

Such an example happened this past week. Let's walk through it and learn from someone else's mistakes.

Ignore Your Competition

Recently, I answered a couple questions about pricing a new type of product for an existing market. The founder had developed a new way to do business and was trying to compete against entrenched dinosaurs in a competitive industry. The new product was better, faster, and less expensive than the old way, but it wasn't getting any traction.

The founder was having trouble figuring out if he should price his new product to undercut his competition on their commission-based pricing or just come out of the gate with a more customer-friendly -- but less familiar-- subscription model. And if the latter, where he should put his price points based on where his competition's price points were.

That's a lot to unpack, but I told him the first thing he needed to do was to ignore his competition and focus on customer value. To understand how to do that, I gave him an anecdote that anyone should be able to apply to whatever product they're trying to price.

Running Shoes and Obvious Value

I have a hard time finding running shoes that fit well. I'm not alone and my feet aren't weird. But I like to run, and when I run, if my shoes don't fit well, my feet will hurt. It's not enough pain to keep me from running, just enough to make itself known. Then the pain goes away after a little while, and I can run again the next day.

Like I said, I'm like most people. Most people wear shoes that fit fine, but not well. In fact, most runners run in shoes that fit fine, but not well, and most runners deal with a certain amount of discomfort at a certain level of effort. This has been going on for ages, because the pain is like a stress headache. You don't notice it until it's gone.

Launching a disruptive new product into an existing competitive space is exactly like that. It's the daunting proposition of removing pain that everyone has but no one realizes they have it. 

And furthermore, they're getting gain with that pain. Gain, no matter how painful, is something no one wants to put at risk. In other words: "Don't fix what's only a little bit broken."

The reason why most runners run with running shoes that fit fine but don't fit well is that they don't want to take the time or spend the money to get fit for running shoes that do fit well. In most cases, the reason is both the time and the money, but once you remove the time, the money becomes less of an object.

So, if you offer me a pair of running shoes that will remove that pain, I will pay whatever you want -- within limits, of course. Because I don't care how the shoes look or how many people are running in them, I just want shoes that will let me run farther and faster with less pain.

When you do that, you immediately take the competition out of the pricing equation. You just have to get me over the hump of spending the time to do the fitting.

If you're truly offering a disruptive product to an existing customer base, you should be turning the money decision into a time decision. 

Don't Make Your Customer Do the Math

One of the reasons subscription pricing is so popular isn't because it's cool or trendy, it's because it takes the math out of the customer's hands and sells the product on higher value, not lower price. 

I've already made my decision on how much I'm willing to spend on removing the pain (a lot). Now you just have to make me aware of the pain and prove to me that you can remove it. Quickly.

You can't do that with running shoes, not yet anyway. But you can do it with a lot of other products, including this entrepreneur's new and disruptive product. 

Calculate the cost of the pain, show how you can remove it, then sell your product at a subscription price lower than that cost. Now you're selling obvious value, and your product is priced to do so. 

If you're selling a truly disruptive product, your current competition shouldn't enter into your pricing. But don't worry, once you're successful, you'll have plenty of new competition that will come out of the woodwork, all of them trying to take your market share now that you've established a new and proven way for doing old business.

At that point, let the price wars come. You'll beat the competition every time.