Price your product

Why this step matters

Price is the strongest lever you have on revenue, and it shapes who buys, how they value the product and how much you can spend to acquire each customer. Most first-time founders underprice: they fear rejection, anchor on their own costs or on the cheapest competitor, and end up with customers who churn and a business that cannot afford marketing or support. A considered price, tested with real buyers, tells you quickly whether the business can work.

How to do it

1. Choose your business model first. Subscription, one-time licence, usage-based, transaction fee, marketplace commission or freemium each set different expectations. If the product is content or a free tool, ads, affiliates or sponsorships may be the model instead.
2. Pick a value metric. This is the unit you charge for that grows with the value the customer gets: seats, projects, contacts, API calls, invoices, storage, revenue processed. A good metric is easy to understand, easy to predict and fair as customers grow.
3. Estimate the value you create. Ask customers what the problem costs them today in money or hours, and what they currently pay for workarounds. Your price should be a fraction of the value; for business tools, many founders aim for something like a tenth of the value created, but test it rather than assuming.
4. Look at alternatives. List what competitors and substitutes cost (including spreadsheets and hiring someone). Position your price deliberately above or below, and know why.
5. Design two or three tiers. A starter tier for small users, a main tier for your ideal customer, and a higher tier with features larger customers need (seats, permissions, support, security). Make the middle tier the obvious choice.
6. Test willingness to pay. In customer calls, ask what price would feel too expensive, expensive but worth it, and too cheap to trust. Try different prices on landing pages or for different cohorts and measure conversion, not opinions.
7. Decide on trials and annual plans. A free trial or freemium plan lowers the barrier; an annual plan with a discount improves cash flow and retention.
8. Publish, then revisit. Put prices on a clear pricing page in USD (and local currencies where it matters), show what each tier includes and review the numbers every quarter. When you raise prices, keep existing customers on their old price for a while.

What it costs and how long it takes

Pricing work costs nothing but time: a week or two of customer conversations and a pricing page. The first price will be wrong in some way; plan to revisit it after 20 to 50 paying customers, and expect pricing to be an ongoing experiment for the life of the company.

Free credits, perks and services that help

Billing platforms in /best/payments-billing handle tiers, trials, coupons, usage billing and currency conversion, which makes price tests cheap to run. Analytics perks in /perks help you measure conversion by plan. When you are ready to collect money, the next step is taking payments.

A worked example

Suppose you sell scheduling software to small physiotherapy clinics. Interviews show a receptionist spends about five hours a week on bookings and reminders, and missed appointments cost each clinic several sessions a month. Your value metric could be practitioners per clinic, because value grows with the number of people being booked. You might test a starter tier for one practitioner, a main tier for up to five with SMS reminders and online payments, and a higher tier for multi-site clinics with reporting and priority support. Show the annual option with a discount, offer a 14-day trial, and after your first 30 sales check which tier people choose and where trials drop off. If almost everyone picks the cheapest tier, the tiers are not separated by the right features; if nobody hesitates at the price, it is probably too low.

Common mistakes

• Cost-plus pricing. Your hosting bill says nothing about what the customer will pay.
• Being the cheapest. Low prices attract price-sensitive customers who churn and need the most support.
• Too many options. Five tiers and ten add-ons slow buyers down.
• Never raising prices. As the product improves, the price should follow.
• Free forever with no path to paid. A free plan needs a clear limit that makes upgrading natural.

Go deeper

Monetizes compares every way to earn from a product or audience, from subscriptions and usage pricing to ads, affiliates and sponsorships, with the platforms behind each: monetizes.net.