Startup pricing: how to set the price of your offer

Which methods can you use to set a price?

Three approaches work together: cost-based, competitor-based and value-based pricing. None is enough on its own, and each plays a different role.

For software, the cost of serving one more customer is often low, so a purely cost-based price would leave most of the value on the table.

How do you estimate value for the customer?

Value is measured from the customer’s point of view, starting from a specific problem your product solves. The aim is to express the gain in a unit they understand: hours, money, errors avoided or extra customers.

1. 1Identify the customer segment that feels the problem most strongly.
2. 2List what the product changes for them: time saved, extra revenue, costs or risks avoided.
3. 3Quantify those gains with customers themselves in interviews, using their own figures.
4. 4Choose a price that captures only part of that gain, so buying remains clearly worthwhile.

This assumes you have already confirmed the problem exists. If not, start by validating your idea before debating price.

How do you test willingness to pay?

Asking “how much would you pay?” produces unreliable answers. It is better to observe behaviour and secure commitments, even small ones.

• Quote a specific price at the end of a customer interview and watch the reaction: hesitation or negotiation are useful signals.
• Offer a pre-order, a deposit or a signed letter of intent at a given price.
• Test several price points on different offer pages and compare conversion rates.
• Present two or three plans and see which one people choose, which reveals price sensitivity.

Real payment signals are also strong evidence of product-market fit, so keep tracking them over time.

Subscription, usage, freemium or tiers: which model should you choose?

The right model is the one whose billing unit tracks perceived value. If customers gain more as they use more, price can follow usage. If they value continuous access, a subscription is natural.

These models are often combined, for example subscription tiers with an extra charge above a certain volume.

Is pricing different for B2B and B2C?

Yes. The buying decision works differently, which changes how you present and negotiate price.

• In B2B, price is justified by return on investment, several people are involved in the decision and discounts for annual commitment or volume are common.
• In B2B, a published price for smaller plans and a quote for large accounts lets you adapt without losing transparency.
• In B2C, decisions are quick and emotional, so the price must be simple and easy to compare, and free trials or launch offers matter more.
• In B2C, price sensitivity is often higher, so test psychological thresholds and presentation (monthly or annual).

When and how should you raise prices?

Revisit your price when the product gets richer, when you move towards larger customers or when signals show that value clearly exceeds price.

• ✓Prospects accept the price without negotiating and conversion stays healthy.
• ✓New features deliver value that customers mention unprompted.
• ✓You now sell to larger customers who get more value from the product.

1. 1Apply the new price to new customers first.
2. 2Tell existing customers in advance and explain what has changed in the offer.
3. 3Watch cancellations and feedback closely in the following weeks.

Which pricing mistakes should you avoid?

• Pricing very low to attract the first customers, then never daring to raise it.
• Copying a competitor’s price without understanding their costs or target market.
• Offering so many plans and options that customers cannot choose.
• Using a billing unit customers do not understand or cannot control.
• Setting the price alone, without the co-founders who sell or track margins.