Skip to main content
Pricing is one of the highest-leverage decisions in product. Get it right and it accelerates growth, aligns incentives, and reflects the value you deliver. Get it wrong and it creates friction, leaves money on the table, or sends the wrong signal about what your product is 💰

​
The main models

Flat-rate subscription - one price, all features, billed monthly or annually. Simple to communicate, easy to buy, easy to forecast. The downside: it doesn’t scale with the value customers get. A power user and a casual user pay the same. Per-seat pricing - price scales with the number of users. Works well for collaboration tools where more users means more value (Figma, Notion, Slack). Can create friction when teams need to limit licences to control costs - which sometimes means they limit adoption too. Usage-based pricing - customers pay for what they use (API calls, messages sent, data processed). Aligns cost directly with value and lowers the barrier to start. Harder to forecast for both the customer and the business. Common in infrastructure and developer tools (Stripe, Twilio, AWS). Tiered pricing - different packages at different price points, usually segmented by features or usage limits. Lets you serve multiple customer segments and create a natural upgrade path. The risk: too many tiers create decision paralysis; too few leave segments unserved. Freemium - a free tier that converts to paid. Works as a PLG motion when the free tier delivers genuine value and the paid tier unlocks something users naturally need. Fails when the free tier is too generous (nobody upgrades) or too limited (nobody finds value) 💡

​
Value-based pricing

Most companies price based on costs or competitors. Value-based pricing starts from a different question: how much is this worth to the customer? It requires understanding the customer’s alternatives and the economic value your product creates for them - time saved, revenue generated, cost avoided. It’s harder to do but consistently produces higher prices and better margins.

​
The packaging problem

Pricing model and packaging (what’s in each tier) are inseparable decisions. A great pricing model with bad packaging - the wrong features in the wrong tiers - still fails. The principle: gate features that drive upgrade motivation, not features that are necessary for basic success. Lesson learned: every pricing conversation I’ve been in that started with “what should we charge?” went better when we restarted it with “what outcome are we pricing against?” 🙌