Pricing Strategies For Online Products

"Is $20/month too much for our product?" Instead of guessing, we used the Van Westendorp method to find our pricing sweet spot. 4 questions revealed exactly what users would pay (and we haven't touched our pricing since). Here's the framework any founder can steal: 1. Send a survey to actual users, not prospects We surveyed people already using Gamma. They understood the real value of our product, not hypothetical value. Too many founders survey their waitlist or randomly select people who have never used their product. That's like asking someone who's never driven about car prices. 2. Ask these 4 specific questions - At what price would this be too expensive for you to consider it? - At what price is it expensive but still delivering value? - At what price does it feel like a bargain? - At what price is it so cheap you'd question if it's reliable? These create bookends for perceived value. You're mapping the entire spectrum of price psychology, not just asking "what would you pay?" 3. Plot the responses and find where the lines intersect Graph responses from lots of users. Where "too expensive" and "too cheap" lines cross: that's your acceptable range. Where "expensive but fair" meets "bargain": this is your optimal price point. 4. Test within the range, don't just pick the middle The intersection gives you a range, not a number. We ran pricing experiments within that range to see actual conversion rates. A survey shows willingness to pay; testing reveals actual behavior. 5. Lean towards generous (especially for product-led growth) We chose to be more generous with AI usage than our "optimal" price suggested. Word-of-mouth growth matters more than maximizing initial revenue. Not everything shows up in the numbers. 6. Lock it in and stop tinkering Once you find the sweet spot through data, stick with it. We haven't changed pricing in 2 years. Every month debating pricing is a month not improving product. Remember: pricing is a signal, not just a number (Image: First Principles)

One thing I push early-stage B2B founders to do (and it’s harder than it sounds) is to really understand — and quantify — the value you deliver to customers. Very few can put a dollar number on it.💡 Try to estimate the value your product creates for a customer in real dollars ($Z) 💰 Once you do that, , you can ask a few important questions to qualify how robust and urgent the value proposition really is: ▪️ Is $Z actually meaningful in the context of the customer’s business? (If it’s a rounding error for them, say <2% of top line, selling will be painful 😬) ▪️ Can you show or prove $Z quickly, or are you asking the customer to take a leap of faith? Quantifying value proposition also helps with 💵 pricing and 📐market size, which many founders struggle with early on. Example 1: cost / time savings ⏱️ - Say you’re selling software that saves a RevOps team ~5 hours per week. - Fully loaded cost is ~$80/hour → ~$20k/year in savings. That’s your $Z. - If you’re saving time or money, customers will often pay ~10–20% of that value. So a ~$2–4k ACV is a reasonable first pricing hypothesis 🎯 Example 2: revenue generation 📈 - Now say your product helps a sales team close 2 extra deals per quarter. - Each deal is worth ~$50k → ~$400k/year in incremental revenue. That’s $Z. - When you’re directly helping customers generate revenue, they’re often willing to pay more — say ~20–30% of the value. That points to an $80–120k ACV range (assuming you can prove the value). More importantly you can use $Z to estimate market size.  📐 Start bottoms up. Market = X customers × $Y ACV = market size Where: ▪️ $Y ≈ 10–20% × $Z (for cost/time savings) ▪️ $Y ≈ 20–30% × $Z (for revenue generation) Finally, pressure-test the assumptions: ▪️ Are we being precise about who “X customers” actually are? Do I need to sell a story where I start with a small #X and then expand? ▪️ Does $Y line up with real budgets and comparable spend? ▪️ Can we acquire customers for less than ~$Y/3? ▪️ Do we need more product to credibly charge $Y? You don’t need perfect answers early but a strawman that allows YOU to understand why you are willing to spend the next 10 years of your life working on something. 🚩

Amazon just flipped the script on reimbursements 🧾 Used to be: if Amazon lost or broke your stock, they’d pay you based on your average sale price. Now? You’ll get back only your manufacturing cost. And if you don’t upload it, Amazon will guess low. This change has been live since March, but many brands are just now seeing the hit in their June P&Ls. Here’s what it actually looks like: 🛒 Retail price: €79 🏷️ Your sourcing cost: €28 💸 Old reimbursement: ~€70 ❌ New reimbursement: €28 📉 Margin loss: €42 per unit And this isn’t a niche problem. If 10% of your FBA stock gets lost or damaged before it’s sold, you could lose 3 to 5 points of margin overnight. 💡 Here’s what smart sellers are doing right now: 🔍 Audit Amazon’s estimates Export your cost data, sort by lowest % of retail, and flag the bad ones 📤 Upload real factory costs Use the sourcing cost template in Seller Central to upload your true COGS 🧾 Keep invoices on hand You’ll need them to dispute lowball reimbursements 📦 Upgrade packaging and prep The cheapest loss is the one that never happens 📊 Rebuild your cost model Assume you get back only COGS on pre-order loss 🛡️ Review insurance coverage Especially if you rely on FBA for high-value goods This isn’t just about compliance. It’s about protecting your margin before it disappears into Amazon’s guesswork. If you're still relying on the old system, you’re leaving money on the warehouse floor. Get your operations & finance team in now. And get your sourcing cost data under control. 📦 Because in 2025, Amazon’s warehouse mistakes are your problem now.

Most startups play defense when discussing pricing with customers. They dance between asking for too little, leaving money on the table, and asking for too much, only to lose the customer’s interest. The very best companies lead their customers in that dance. They use pricing as an offensive tool to reinforce their product’s value and underscore the company’s core marketing message. For many founding teams, pricing is one of the most difficult and complex decisions for the business. Startups operate in newer markets where pricing standards haven’t been set. In addition, these new markets evolve very quickly, and consequently, so must pricing. But throughout this turmoil, startups must adopt a process to craft a good pricing strategy, and re-evaluate prices periodically, at least once per year. The Three Core Pricing Strategies There are only three pricing strategies startups should pursue: Maximization, Penetration and Skimming. They prioritize revenue growth, market share and profit maximization differently. Maximization (Revenue Growth) - maximize revenue growth in the short term. Startups should pursue maximization when there are no clear differences in customer segments’ willingness to pay, and when the optimal short term and long term prices are equal. Many mid-market software companies price with the goal of revenue maximization, negotiating for the highest possible price in each sale. Penetration (Market Share) - price the product at a low price to win dominant market share. A bottoms-up strategy lends itself to penetration pricing. Price low to minimize adoption friction, grow quickly, and then move up-market after developing broad adoption. Penetration pricing leads to land-and-expand sales tactics. Expensify, Netsuite, New Relic, Slack follow this model. Penetration prioritizes market share. Skimming (Profit Maximization) - start with a high price and systematically broaden the product offering to address more of the customer base at lower prices. Skimming is widespread in consumer hardware. Apple sells the latest iPhones at the highest prices, and repackages older models at lower prices to address different customer segments. As Madhavan Ramanujam tells it, Steve Jobs was both a product genius and pricing genius. By pairing the two skills, he led Apple to record-breaking profits quarter after quarter. Skimming is less common in the software world because few startups develop a product at launch that will be accepted by the most sophisticated customers (and those willing to pay prices that generate the greatest margin). There are exceptions: Oracle’s database, Tanium’s security product, Workday’s human capital management software. Read the full post here : https://lnkd.in/g-mxQiV9

Set and forget is not a pricing strategy ! Price--> Design--> Build We know that's what everyone says, but thats an oversimplification of what the entire process should look like. The assumption your pricing was correct in the pre-design phase and doesn't need change is dangerous, dangerous, dangerous !! I have seen too many physical and software products change drastically between initial design to final delivery. Product owners will typically assume that pricing still holds. You have to change that philosophy. In the real world we need a lot more iteration in price: Step 1: Initial Price: This stage you quantify the value and set an initial target price. This is a combination of internal/external research, some value quantification and pricing knowledge. Step 2: Design: With that price info, the product team designs a product that hits product and profitability targets. This is also where you need to keep track of the product margins. Often product will go design a better product at the expense of higher cost, and margins suffer before launch. Step 3: Reprice: Now that we know the new design constraints that impact the profitability, this stage gives you the opportunity to reprice the product based on the design. If substantial value has been added, price should go up. Do not fall into the 'lets over deliver on value and keep price same' trap. Step 4: Build: Now with that new price info and product roadmap the product goes through the build stage. Step 5: Pre launch reprice : Now significant time may have passed since last price review. The market for the product, the economy etc may have changed. This stage can assist in making last changes before product goes out. Good time to also establish guardrails for price performance, discount strategy, or sales strategy. Step 6: Launch: Goes without saying the product is out in the real world. Great way to capture feedback. Also a stage where performance is measured against the price guardrails. Step 7: Reprice 3: Based on sales feedback, you start charting next steps. Selling too slow, you may need discount or reprice. Selling too fast, it may be overdelivering on price vs value. Pricing metric may need change. Fx may have changed. This is the price adjustment stage, should be annual or semi annual. You can incorporate these steps into new product introduction framework or annual or semi annual pricing strategy process, either ways it will help establish good pricing principles in the org. I know of many products that once designed were never repriced years into its life.. Surely things must have changed all those years... Think of Pricing as a lifecycle !! -------------------------- We are in #Pricingtribe.

FOMO works in B2B! Behavioural studies on scarcity show a clear pattern: when something is both desired and genuinely limited, people decide faster, assign it higher value, and are more likely to commit. When demand is weak, though, layering on urgency – countdown timers, “last few spots”, fake limits – tends to backfire, creating scepticism rather than sales. Humans don’t just respond to scarcity itself; they respond to what scarcity signals. Limited access suggests that others value it, that capacity is constrained for real reasons, or that the opportunity won’t be available in the same form again. In that context, FOMO doesn’t create demand from thin air; it nudges already-interested buyers out of indecision and into action. Practically, this means scarcity tactics are most effective when they sit on top of clear intent signals: people are visiting the page and returning, asking questions, joining a waitlist, or engaging with your content. In those moments, stating real constraints – a fixed cohort size, genuine capacity limits, a true deadline – helps buyers make a confident choice instead of endlessly circling the decision. What that means for your brand: FOMO should be a spotlight, not a smoke machine. Use scarcity to highlight real demand and real constraints, protect trust by avoiding artificial pressure, and design your campaigns so urgency accelerates good-fit decisions instead of trying to manufacture interest that isn’t there.

𝗣𝗩𝗥 𝗠𝗮𝗸𝗲𝘀 𝗠𝗼𝗿𝗲 𝗠𝗼𝗻𝗲𝘆 𝗙𝗿𝗼𝗺 𝗣𝗼𝗽𝗰𝗼𝗿𝗻 𝗧𝗵𝗮𝗻 𝗠𝗼𝘃𝗶𝗲 𝗧𝗶𝗰𝗸𝗲𝘁𝘀. 𝗛𝗲𝗿𝗲'𝘀 𝗪𝗵𝗮𝘁 𝗗𝟮𝗖 𝗙𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝗖𝗮𝗻 𝗟𝗲𝗮𝗿𝗻. Look at this chart. PVR INOX generates ₹32,582 crore from movie tickets. But food and beverages bring in ₹18,864 crore and it's their fastest-growing revenue stream, up 21% in FY24 while ticket sales grew just 19%. 𝐇𝐞𝐫𝐞'𝐬 𝐭𝐡𝐞 𝐜𝐨𝐮𝐧𝐭𝐞𝐫𝐢𝐧𝐭𝐮𝐢𝐭𝐢𝐯𝐞 𝐩𝐚𝐫𝐭: food and beverage sales generated around ₹1,958.4 crore, up from ₹1,618 crore in the previous year. The margin on that popcorn? Significantly higher than the margin on your ₹250 ticket. 𝐓𝐡𝐞 𝐑𝐞𝐚𝐥 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐌𝐨𝐝𝐞𝐥 PVR isn't in the movie business. They're in the high-margin consumables business with movies as the traffic driver. Tickets get people through the door. Food keeps the business profitable. This is the exact playbook D2C founders miss: your core product doesn't have to be your most profitable product. 𝐖𝐡𝐚𝐭 𝐃2𝐂 𝐁𝐫𝐚𝐧𝐝𝐬 𝐂𝐚𝐧 𝐋𝐞𝐚𝐫𝐧 Think about your "popcorn moment." What's the high-margin add-on that complements your core offering? Skincare brands selling ₹800 serums should bundle ₹200 sheet masks at checkout. Apparel brands selling ₹1,500 shirts should push ₹300 accessories. Fitness brands selling ₹5,000 equipment should offer ₹500 supplement subscriptions. PVR's Food & Beverage spend per head reached an all-time high of ₹148 in Q1 FY25. That's not accidental. It's strategic bundling, strategic positioning, strategic pricing of complementary products that customers are already primed to buy. 𝐓𝐡𝐞 𝐀𝐝𝐝-𝐎𝐧 𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜𝐬 PVR's popcorn costs them ₹20-30 to make. They sell it for ₹300+. That's 10X markup. Your D2C brand probably has 2-3X markup on core products because of competition and customer acquisition costs. But add-ons? Accessories, consumables, complementary items – those can carry 5-8X markups because customers aren't price-comparing them. They're already committed to the purchase journey. 𝐀𝐜𝐭𝐢𝐨𝐧 𝐒𝐭𝐞𝐩𝐬 Identify your high-margin add-on that enhances the core product experience. Place it strategically at checkout, not buried in your catalog. Bundle it with your hero product during festive seasons. Track "attach rate" – how many customers buy the add-on with the main product. PVR's real genius isn't selling movie tickets. It's monetizing the moment when customers are emotionally committed and their wallets are already open. That's your opportunity too. Picture: Respective Owner #D2C #businessstrategy #pricing #revenue #growth #Ecommerce

(Part 2) Bundles that actually move the needle on AOV In Part 1, we covered layout, positioning, and small UI tweaks that reduce friction and increase conversions on the product page Now let’s talk strategy, specifically how to use bundles to drive higher average order value without relying on random upsells or blanket discounts The right bundle strategy doesn’t just increase cart size It helps you launch new products, clear stale inventory, and create a better customer experience Here are 3 proven ones you can start with 👇 1. “Try me” launch bundles 💡 Perfect for: new products, seasonal collections, or early access drops Pair your new release with a proven bestseller to get attention and lower the risk of trying something new How to do it: • Use “Buy X, Get Y” (e.g. Buy our hero product, get the new one at 25% off) • Add a limited-time tag or countdown badge to drive urgency 2. Inventory busters 💡 Perfect for: slow-moving SKUs, returned items, or high-CTR but low-converting products Have stock you want to clear without discounting it to the ground? Bundle it How to do it: • Fixed bundles or BOGO formats work well • Combine with top-selling products to make the offer more attractive 3. Mix & match builder 💡 Perfect for: apparel, beauty, wellness, and giftable products Give customers a way to create their own bundle, it feels more personal and increases perceived value How to do it: • Let shoppers choose 3-5 products from a collection • Offer tiered pricing (e.g. 3 items = 15% off, 5 items = 25% off) These aren’t gimmicks. They’re practical tools to boost margin, move stock, and give customers more of what they want 📌 Next up: 3 more bundle ideas to increase cart size and personalize the experience. Stay tuned #shopify #ecommerce #growth

Pricing Psychology in Luxury: Shaping Perception, Creating Desire In the luxury market, price is far more than a number. It is a signal that shapes how consumers interpret value, exclusivity, status, and brand stature. For any brand aiming to operate at the top of the market, understanding the psychology of pricing is essential to protect equity and elevate the customer experience. Below are four key psychological strategies that influence perception and drive purchasing behavior in luxury: 1. Anchoring When consumers assess a luxury product, they instinctively rely on a reference point. Presenting a higher priced item first creates a benchmark that makes other options feel more attainable while still premium. This simple sequence reinforces the brand’s prestige and clarifies the hierarchy within the collection. 2. Premium Bundling Curating products or services into a single premium bundle can increase perceived indulgence and sophistication. In luxury, bundling is not about offering a deal. It is about crafting a narrative that highlights craftsmanship, experience, heritage, and emotional value. A bundle should feel like an elevated universe rather than a financial incentive. 3. Rounded Pricing for Prestige Strategies such as $99.99 belong to the mass market. Luxury clients expect clarity and confidence. Rounded pricing like $500, $5,000 or $12,000 supports the perception of mastery, control, and quality. It signals that the brand is not seeking volume but rather communicating authority and enduring worth. 4. Scarcity and Exclusivity Limited editions, controlled production, appointment only access, and one-of-a-kind creations amplify desire by signaling rarity and privilege. When scarcity is authentic and price is positioned accordingly, clients feel they are entering a protected circle. Exclusivity becomes an active part of the value proposition. Why This Matters In luxury, pricing is not a competitive tool. It is a positioning tool. A coherent pricing strategy strengthens perceived value, deepens emotional engagement, and builds long term loyalty. A weak or inconsistent strategy, on the other hand, erodes trust and diminishes brand stature. If you plan to refine your pricing architecture and align it with the psychology of today’s discerning luxury consumer, I would be glad to help. I support luxury brands in shaping pricing strategy, elevating perceived value, and building product and service ecosystems that resonate with high net worth and ultra-high net worth clients worldwide. Let’s connect and explore how thoughtful pricing can strengthen your brand. #LuxuryBrandStrategy #PricingPsychology #LuxuryPositioning #ExclusivityMatters #Consulting

Last quarter, I told a client to RAISE their prices by 50% In the middle of a recession. While losing deals to cheaper competitors. When their win rate was already below 20%. They took the risk The results? → Win rate: Jumped from 19% to 40% → Sales cycle: Cut from 118 days to 70 → Revenue: Up 150% in just 90 days Here's what we discovered: Their low prices weren't making them more competitive They were making them less trustworthy When we analyzed their lost deals: 80% of prospects who said "too expensive" never bought from anyone The deals they won at discounted prices had 2X higher churn rates Procurement was treating them as a commodity because they positioned as one Their best customers were the ones who DIDN'T negotiate on price So we implemented what I call "Trust-Based Pricing": - We increased prices to reflect the true value delivered - We eliminated all discounting completely - We restructured compensation to reward margin, not revenue - We trained reps to walk away from price-sensitive prospects The transformation was immediate: - Prospect engagement quality: Increased 100% - Deals requiring procurement approval: Reduced by 60% - Implementation success rate: Up from 50% to 75% - Average customer lifetime: More than doubled The dangerous myth killing your sales growth: Lower prices win more business. The reality? In complex B2B sales, your price is a powerful signal about your confidence and the value you deliver. Your competitors are busy slashing prices and offering "special discounts." Meanwhile, market leaders are systematically increasing prices and watching their close rates improve. What if you raised your prices tomorrow and trained your team to confidently defend the new value proposition? P.S. If you need help with your sales, send me a message