Remember 2015? An Ola ride from Saket to Connaught Place cost you ₹80. An auto would have cost ₹120. A taxi would have cost ₹300. It felt like Diwali every time you opened the app. Your generation had discovered the cheat code to Delhi's transport problem.

Ola was winning. Ola drivers were earning. Ola customers were delirious. Investors were pouring money in. From the outside, everyone was a winner.

Except one person. Ola, the company, was losing ₹100 on every ₹80 ride. The price you were paying? That was never the real price. Someone else was quietly paying the difference. And when the party ended, so did the discounts.

The trap of underpricing to grow

When a startup is trying to capture a market, its biggest enemy isn't a competitor. It's inertia. People don't change their habits easily. They've been taking autos for 10 years. Getting them to switch to an app is hard.

The tempting solution is to make the switch irresistible. Price your ride so low that taking an auto feels stupid. Subsidize the experience. Give discounts. Throw in cashback. Do whatever it takes to break the habit. Once users are locked in, you raise prices and make money.

On a whiteboard, this strategy looks brilliant. In reality, it creates a monster that almost never dies. Because the customers you acquired with artificially low prices are not your customers. They are price-chasers. And price-chasers have zero loyalty.

The Ola math that should have scared everyone

Ola's early rides were priced at something like ₹6 per kilometre. For a driver to make a living at those prices, Ola would have needed to charge ₹15-₹20 per kilometre. The difference wasn't magic. It was subsidy. Ola paid the driver the higher amount and charged the customer the lower amount. The gap came out of investor money.

At small scale, this is survivable. At large scale, it becomes terrifying. Imagine you're running a million rides a day. A ₹100 subsidy per ride means ₹10 crore going out the door every single day, just to keep prices artificially low. In a month, you've burned ₹300 crore. In a year, ₹3,600 crore. And the customer has still been trained to believe a fair ride costs ₹80.

The moment you try to raise prices to reality — even just to ₹150 for that same ride — users complain. They say you've become expensive. They download a competitor who's still burning money. Your market share drops. You panic. You bring the discounts back. The cycle never ends.

Why this is uniquely bad in India

Indian consumers are unusually price-sensitive. Not because they're cheap, but because disposable income is genuinely tight. A ₹50 difference on a ride actually matters to most people. This means discounts work incredibly well at acquiring users in India. It also means raising prices later is harder here than almost anywhere else.

So when an Indian startup underprices to gain users, it's making a very specific bet. The bet is that once people are addicted to the convenience, they'll pay the real price. But addiction doesn't work that way with commodity services. Riding a car from A to B is not addictive. It's utilitarian. If someone else offers the same utility at a lower price, people switch in a heartbeat. No loyalty. No nostalgia. Just math.

This is why ride-hailing, grocery delivery, quick commerce, and food delivery have all struggled to raise prices in India. The businesses trained their customers to expect the subsidized price. When they tried to charge the real price, customers left.

The drivers' side of the story

There's another painful angle to underpricing. Ola didn't just subsidize customers. It also had to artificially inflate driver earnings to get them into the system. Early Ola drivers were making ₹80,000 to ₹1 lakh a month. That was a dream salary for them. They bought cars on loans specifically to drive for Ola.

As the subsidies shrank, driver earnings crashed. The same driver who was making ₹1 lakh in 2016 was barely making ₹30,000 by 2020. Many couldn't pay back the car loans. Many quit and went back to regular auto or taxi driving, disillusioned. Some protested. The driver ecosystem that Ola had created with its subsidies collapsed almost overnight when the money stopped.

This is the other side of underpricing that founders don't talk about. You don't just train customers to expect an unreal price. You also train suppliers or workers to expect an unreal income. When reality returns, both sides are angry at you. You've created a mess on both ends of the market.

Healthy pricing looks boring

Compare this to a company that prices sensibly from day one. Let's say you're starting a home-tutoring business. You calculate your tutor's cost, overhead, profit margin, and set the price at ₹800 per session. You don't offer a "first session free" or "book 10 at ₹400 each" gimmick. You just charge ₹800. Every time.

Growth will be slower. You'll lose customers who were only shopping for cheap. That's fine. The customers you do attract will be the ones who actually value the service at ₹800. They won't churn when you raise prices to ₹900 next year. They won't run away to a competitor offering ₹750. They came for the value, not the discount.

This is called price discipline. It's unsexy. It's the opposite of "scale fast." And it produces much more durable businesses than any growth-hacking trick.

The single question founders should ask

Before launching with a low introductory price, every founder should ask this. "If I raised the price to what I actually need tomorrow, would my customers stay?"

If yes, congratulations, you have genuine demand. You don't need the discount. Price correctly from the start.

If no, you don't have a business. You have a subsidy arbitrage. You are paying people to pretend to be customers. The moment you stop paying, they go away. No amount of scale will fix this.

The Nykaa counterpoint

Nykaa, the beauty e-commerce company, is instructive here. It grew slowly in its early years. Yes, it ran some discounts, but never the kind of reality-distorting subsidies Ola and others did. Its average order value was healthy from the start. Its customers came for product selection and reliability, not because beauty products were weirdly cheaper on Nykaa than anywhere else.

When Nykaa went public in 2021, it was one of the few Indian consumer tech IPOs that was actually profitable. That profitability came from years of not subsidizing. From charging what the product was worth, even if it meant growing slower than competitors.

This is the long game. Most founders don't have the patience for it. A few do. Those few build companies that last.

Underpricing feels like a growth strategy. Usually, it's a survival strategy disguised as a growth strategy. And survival strategies have a habit of running out of cash.

What this means for you

If you ever start something, resist the temptation to price too low. Test pricing early. Find customers who pay your real price. Build from there. Growing to 10,000 real customers is far better than growing to 100,000 fake ones who will vanish the moment you stop subsidizing.

And when you see a brand offering you a crazy discount — a 70% off, a first-month free, a ride for a fifth of what anyone else charges — enjoy it while it lasts. But don't assume this is the real price. Somewhere, someone is quietly paying the difference. And when they stop, the deal stops.

That's not a scam. That's just what underpricing always eventually becomes.