What Category Creators Can Learn From Breadmakers

Category creators have many responsibilities. In a recent interview on SaaStr, Mark Organ, Founder @ Influitive stated that his job was to be the 'CMO of the category', customer advocacy. Whilst, the CMO at Influitive, was the CMO for the company. However, responsibilities as category creators extend far beyond this. One of which is pricing and establishing an anchor price for future providers in the category.

So how should category creators go about creating an anchor pricing mechanism? Simple, through a process called arbitrary coherence. The idea that initial prices are 'arbitrary' but once established in our minds, they shape not only what we are willing to pay for an item but what we are willing to pay for related items. 

How can this behavioural psychology be applied to SaaS category creation. You are creating an entirely new product, you cannot have one price for the service. 

Example: When bread makers were first introduced many years ago, few people purchased the one available option. There were no comparables, it was an entirely new product and the benefits of this product were not clear with it standing in isolation. After several years of poor sales, the company released a second bread maker that was far larger and 100% more expensive. The effect, the smaller bread makers began to sell on scale. Why? Consumers now had an anchor price established in their mind for what they are willing to pay for the good. In addition the benefits of the smaller bread maker were highlighted through the larger, more cumbersome other bread maker.

So if you are category creating with your product. Establish a tiered pricing mechanism that will allow the consumer to form this arbitrary coherence and provide the comparable to show this established anchor price is suitable for them.

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