How To Price For B2B with Tom Blomfield | Startup School

Price Wars

Avoiding price wars is crucial for startups facing competitive pressures. Tom Blomfield emphasizes the importance of maintaining high margins and warns against engaging in price wars, which can lead to a destructive race to the bottom 1. Instead, he advises startups to focus on demonstrating unique value and functionality to differentiate their products from competitors.

Competing solely on pricing really is not a winning maneuver. You don't want to get into a head-to-head bidding war for a commodity product.

Blomfield suggests that startups should aim for software margins of 80 to 90%, ensuring their costs remain significantly lower than their pricing to sustain profitability 1.

   

Differentiation

Differentiation is key to avoiding direct competition based solely on price. Tom Blomfield advises startups to set their products apart by enhancing functionality or demonstrating superior value, rather than engaging in price wars 1. He highlights the risks of pricing below cost, which is often a strategy used to capture market share but can be unsustainable in the long run.

You have to price at below your cost, which is not sustainable. And so you're either going to have to figure out how to demonstrate more value or change what you're building ultimately.

Blomfield encourages startups to focus on creating a unique value proposition that cannot be easily replicated by competitors, thereby avoiding direct price competition 1.