Your Pricing Problem is a Positioning Problem
You need to move from product-market fit to position-market fit to solve your thorniest monetization problems. Here’s why and how.
For months now, we’ve been tracing through our masterclass on Pricing & Positioning. We’ve covered all sorts of strategy and tactics, from B2B and B2C pricing through pricing pages and experimentation.
Today, we shift the focus to positioning. And we bring you a real-life, on the ground expert.
Introducing Enzo Avigo
Enzo is the CEO of seed-stage customer analytics startup June.so.
He’s been on the ground running pricing and positioning experiments alongside the rest of us. And as a former PM at Intercom, he has a unique way to speak about these topics for a product audience.
Today’s Post
Words: 4,794 | Est. Reading Time: 21 mins
Preamble: Your Pricing Problems Are Positioning Problems
Every startup founder and PM wrestles at some point with the idea of pricing. And if you’ve been working in this industry for the last decade or so, you’ve probably already read hundreds (if not thousands) of things on the topic.
The questions are all classics:
“Should I go with a freemium model or not? When does it or doesn’t work?”
“Free trial or freemium, what does work best here?”
or also “I built XYZ product, how should I price it? Is X-price too high or is it too low? Maybe, is it too average?”
But if you look at the literature, you’ll notice an unsettling tension between, the overly prescriptive pieces that boldly commit to one claim (“Freemium almost K-I-L-L-E-D our business!!”) and the ones that don’t commit to anything substantial and leave you with not much.
This hasn’t resonated with our experience on the ground.
What we’ve come to the conclusion is: 99% of these pricing dilemmas are actually just positioning dilemmas in disguise in search for a quick and easy fix.
Pricing and positioning are complex constructs deeply interlinked with each other. There’s never an easy fix.
1. The Allure of Pricing, and Why Positioning Matters
But let’s back up for a second and build a first principles understanding of this together.
What is pricing and how is it linked with positioning?
Pricing 101
In simple economic terms, the goal of any good is to find the price at which profit is maximized:
“Not too high” so that we scare some of our potential customers off.
“Not too low” so that makes us leave good money on the table.
Also in simple economics terms, revenue is “quantity” times “price.” If we represent this relationship as a parabola where “quantity” and “price” are the axis, then it’s clear that the “best price” should be the point at which the curve peaks - Right in the middle:
In the perfectly rational and overly simplified world that most of the neoclassical economists love to inhabit, this makes (more or less) sense.
Yet we know in the real world things are much more complicated than that. Otherwise we all could just construct our demand/supply curves, identify the substitutes, measure elasticity, and price things perfectly to maximize profits.
Pricing and Positioning are Inextricably Linked
The reality is: pricing and positioning are really 2 sides of the same coin. Like 2 dependent variables, you can’t quite alter one without ultimately changing the other. And it's within the resulting Gestalt that we can ultimately understand why we need a product, and what is the thing that ultimately drives us towards it.
Without going too far back in time, take, for instance, GilletteXerox. It was not their products themselves (razors and copiers), but the interplay between their positioning and their pricing strategies (“cheap razors + expensive blades” and “lease the copier + sell the toner”) that drove their success.
These are not isolated examples. Many of what are considered to be the greatest innovations of the last decades, aren’t quite technological breakthroughs as much as they are pricing and positioning innovations.
If you think about it, the entire cloud computing sector is driven by a single, profound pricing-positioning idea. Turn OPEX into CAPEX and let enterprises pay-by-the-sip $0.10 offerings instead by the million.
So, going back to economics, the “right price” of a good is increasingly less the numeric representation of the so-called marginal product and increasingly more an artificial abstraction that is more contingent to its market positioning and the public perception of that good.
As humanity moves toward a post-scarcity world, value capture and value creation are much more contingent and subject to change. Value creation isn’t anymore technologically determined by the characteristics of the factor of goods and now largely depends on how business and engineering ideas are intertwined, on how different strategies are employed.
And much of the value capture that happens downstream is now mediated by “brand” and “positioning”, much more than the direct, economical resources that were employed to create it.
Software lends itself to pricing experimentation
In the physical world, the concept of artificial scarcity is limited by the intrinsic excludability of goods–either Alice has the ball or Bob has the ball; they cannot both have it simultaneously–and this inherent limitation restricts the degree to which scarcity can be manipulated.
Conversely, the high malleability of software allows for greater flexibility in creating perceived value. Bits can be modularized, organized, and packaged in a myriad of different and creative ways, enabling the simulation of scarcity and the crafting of unique, value-added experiences that are not possible with physical goods.
Which is why, over the years, the software industry has become highly creative with pricing strategies, introducing concepts like freemium, per-seat pricing, tiered pricing, persona pricing, flat rate pricing, and so many other upgrade mechanisms.
But positioning is still a crucial part of the equation.
2. Positioning is chronically neglected
Everyone knows the same pricing tactics
In 2024, startup literacy isn't nearly as valuable as it was a decade ago. All the cards are laid out on the table, practices and approaches are ubiquitous, and everyone knows everything:
There’s obviously the ultimate guides written in this newsletter.
David Sacks, before he decided to go political with All-In, was a solid entrepreneur and wrote plenty about freemium vs trials among the other interesting things about.
Elena and Lenny, did terrific series of essays in their respective Substacks about freemiums, trials, modalities of upgrades.
Startups out there like Equals, Linear, and others have also been blogging really good stuff about pricing.
Not to mention all the things the OG internet startups wrote about pricing over the years: Patio11, Jason Fried, and the maestro, Jason Lemkin, among the others.
What were once insider tricks have become overused tactics and standard industry playbooks. Understanding "pricing strategies" feels less like an applicable skill and more like an exercise in style.
We’re in ‘Alice in Wonderland’
Like Alice learns in Wonderland, when she asks the Cheshire Cat “Would you tell me, please, which way I ought to go from here?”, if you don’t know what your final destination is, then it doesn’t much matter which road you take, because they’re all right and all wrong at once.
Many of the founders we encounter these days remind us of Alice, asking seemingly simple questions about pricing or other topics that conceal deeper insecurities and cracks in their ground positioning.
We don’t say this with any derogatory intent—figuring out positioning is incredibly challenging. In a complex and noisy world where channels are saturated and everyone is fighting for attention, building genuine one-to-one relationships is harder than ever. Building good software is still difficult, but doing effective positioning has become exponentially harder.
That sort of promised land where customers are flocking to your door, perfectly understanding your product and what it stands for, placing it in the right category, comparing it to the right tools, and (most importantly) agreeing that your pricing reflects the value they receive is, unfortunately, a reality many founders will not experience.
But it’s not possible to develop a single, overarching framework or image that captures the nuances of this pricing-positioning dichotomy.
Instead, we’ll share some heuristics, approaches, and insights to create your own positioning.
3. From Product to Position-Market Fit
To the evergreen question of “I’ve built product XYZ, how do I price it?” one could answer in a myriad of different ways:
Start with something cheaper and then work your way up the market
Do the opposite, start with premium pricing and then make it more accessible
Pick a price, talk with customers, and quickly iterate
To which we say: bullshit.
If you find yourself asking this question, it means that you have overlooked your positioning. The right pricing picks you based on the position you (as a company) occupy on the market, more than you pick your pricing based on a bunch of arbitrary factors.
The Shift from Product-Market Fit
There was a time, not too long ago, where in startupland one could build a thing that solved a real problem, put a price tag on it, and see if the market wanted it:
If they did, then we would have said he had found product-market fit
If they didn’t, we would say he didn’t and it was “back to the lab”
That time, for better or worse, is long gone.
In 2024, a utility provided through software can’t make a dent effectively anymore. People’s heads are overstuffed with competing products, messaging, and narratives. It’s hard for a product alone to get a market edge.
The main exceptions are new tech or hyper-niche markets. ChatGPT is obviously one of the greatest examples in recent memory. But these are rare instances of breakthrough technology (or “radical innovation” borrowing Clay Christensen's dictionary) where the “product” itself carries the bulk of the impact.
Most companies don't have that luxury and are not in such a position.
The Rise of Position-Market Fit
So, if a product alone isn’t enough, then what is enough?
This kind of positional edge is “position-market-fit,” a term from Matt Hodges.
If “product-market-fit” means that you’ve found the right kind of product that the market wants…
“Position-market-fit” means that you’ve found the right combination of product/brand/marketing/pricing/go-to-market/sales/etc in a given domain.
The Importance of Brain Estate
The fundamental reason why “position-market-fit” is so important is that it operates more at a personal and subconscious level. Our brains can only conceptualize a finite set of “characters'' per domain.
Similar to the "Dunbar number" rule, which suggests we can maintain stable social relationships with up to 150 people, our brains are wired to understand only a finite number of company-market associations.
Gaining a strong positional edge, or nailing “position-market-fit” can be seen as the exercise through which a company, with the right combination of product, brand, pricing, marketing and go-market is able to conquer a certain portion of consumer mindshare or, as Enzo has started to call it, “brain-estate.”
The Story of Startup Success
If you step back and analyze some of the best startups from the last decade, you'll see they excelled at this. Their success was often not due to a far superior product (though there are exceptions) but rather a positional edge built on a foundation of multiple layers, with the product being just one of them.
Are you building in an established market dominated by large incumbents with feature-bloated, slow, and clunky software? In that case, you might want to position your product as a speed-first, high-craft, premium option, similar to a luxury car company. Does Linear ring a bell?
Alternatively, if you're entering a highly commoditized market dominated by a few corporate-looking brands, consider positioning yourself as the quirky, fun company that doesn’t take itself too seriously. Embrace the David vs. Goliath narrative with bold, edgy marketing and design. Does Arc Browser come to mind?
It should be obvious, at this point, that their pricing strategies are almost a second-order effect of their employed market positioning.
While product-market-fit opportunities (as intended of product-driven market fit) are much more limited and less available, opportunities for "position-market-fit" are still out there.
We believe it's quite possible to discover new positional angles and ideas that have been overlooked by others.
So here’s how to build those models and differentiate yourself:
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