pricing

Choose a value metric by asking whether customers get more value as they use more of that metric. Common options include per user for collaboration tools, per usage for variable consumption, and flat fees for simple products. The metric should scale with value, be easy to understand, and be hard to game.

Use the Van Westendorp price sensitivity method, which asks four questions about price thresholds to identify an acceptable price range. MaxDiff analysis ranks which features customers value most, informing packaging decisions. Supplement with competitor benchmarking and direct customer interviews.

Raise prices when conversion rates exceed 40%, churn is below 3% monthly, competitors have raised prices, or you have added significant value since the last change. Use strategies like grandfathering existing customers, announcing increases 3-6 months ahead, or tying the raise to new features.

Freemium works when your product has network effects, low marginal cost per free user, and clear upgrade triggers. Free trials work better for complex B2B products needing setup time. Requiring a credit card upfront yields 40-50% trial-to-paid conversion versus 15-25% without.

Three tiers is the industry standard: an entry tier to remove barriers, a recommended middle tier where most customers land, and a premium tier at 2-3x the middle price. Four or more tiers risk decision paralysis unless you serve a wide range of customer sizes.

Value-based pricing requires reliable willingness-to-pay research, which needs 100-300 survey respondents for methods like Van Westendorp. It also assumes you can segment customers by persona, which is harder for products with homogeneous user bases or unclear value attribution.