pricing-strategy

Ask respondents four questions about prices that are too expensive, too cheap, getting expensive, and a bargain. Plot cumulative distributions and find intersections to identify the acceptable price range between the Point of Marginal Cheapness and Point of Marginal Expensiveness, using 100-300 respondents for reliable data.

Identify how customers receive value, map usage patterns to outcomes, and test whether increased usage of the metric correlates with more value delivered. Common metrics include per user for collaboration tools, per usage for consumption products, and per transaction for payment platforms.

Freemium works when the product has viral effects, low marginal cost per free user, and clear upgrade triggers. Free trials fit products needing setup time, higher price points, and B2B buying committees, typically running 7-30 days with full feature access.

Raise prices when conversion exceeds 40%, churn is under 3% monthly, or competitors price significantly higher. Communicate increases to existing customers 3-6 months ahead, offer grandfathering or rate lock-ins, and tie increases to added product value.

Three tiers is the industry standard: an entry tier to remove adoption barriers, a recommended middle tier as the anchor, and a premium tier at 2-3x the middle price. Two tiers suit clear SMB versus enterprise splits, while four or more risks decision paralysis.