pricing-strategy

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 per transaction for payments. The metric should align price with value, be easy to understand, and scale as customers grow.

Use the Van Westendorp price sensitivity meter, which asks four questions about price thresholds to identify an acceptable price range and optimal price point. Complement it with MaxDiff analysis to rank feature value, competitive benchmarking, and direct customer interviews.

Freemium works when your product has viral effects, low marginal cost per free user, and clear upgrade triggers. Free trials work better for products needing setup time, B2B buying committees, and higher price points. Hybrid approaches like reverse trials combine both.

Raise prices when prospects don't flinch at your price, conversion rates exceed 40%, monthly churn is under 3%, or you've added significant value since last pricing. Use grandfathering, advance notice of 3-6 months, or tie the increase to new features to reduce churn.

Three tiers following the good-better-best framework 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.

Van Westendorp surveys need 100-300 respondents for reliable data and can be biased by how the product is described. Direct willingness-to-pay questions are unreliable, so use Gabor-Granger or conjoint analysis instead, and always segment results by persona since willingness to pay varies.