Pricing too low signals weak value and traps you in thin margins that kill growth. Too high loses sales to competitors. The real mistake startups make: underpricing below what customers will actually pay, leaving money on the table and making future increases nearly impossible.
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One of the hardest things in business to work out is what price to charge for your product or service. Pricing a premium product is even harder. Price it too high and you risk losing sales to competitors offering something buyers see as similar but cheaper. On the other hand, underpricing fixes its perceived value position at a low level, making it nigh on impossible to raise prices later. Startups and small businesses invariably set their pricing lower than buyers are willing to pay, The problem isn't just the fact of leaving money on the table. It's that growth is made nigh on impossible due to the profit margins made on each sale. If your only growth tactic is to sell cheaper than established brands, you're commoditizing your value. Ultimately, you're setting your business on a downward spiral, and that's a race you don't want to win.