I’ve changed pricing on my products 14 times.

Each time I thought I had it right. Each time I was wrong about something.

Here’s what I learned.

Mistake 1: Pricing Based on Costs

Cost-plus pricing is for commodities, not software.

The thinking: My server costs $50/month. Development costs $5,000/month. I need 100 customers at $55/month to break even.

The problem: Customers don’t care about your costs. They care about their value.

If your product saves someone $500/month, they’ll pay $100/month happily. Your costs are irrelevant.

Price on value, not costs.

Mistake 2: Only One Price

I launched with a single plan. $29/month. Take it or leave it.

Left money on the table twice:

1. Small users who’d pay $15 but not $29
2. Power users who’d pay $99 but only had to pay $29

Now I have three tiers. Captures more of the demand curve.

The middle tier is always the most popular. It’s the anchor. Price it at what you want most customers to pay.

Mistake 3: Too Many Plans

Went from one plan to seven plans.

Conversion tanked. Too many choices. Decision paralysis.

Three plans is the sweet spot. Four maximum. Beyond that, you’re confusing people.

Mistake 4: Free Tiers That Cost You

Free plans attract users. Most never convert.

I had a free tier with 100 monthly users and a 2% conversion rate. That’s 2 paying customers and 98 support requests.

Free should either:

• Be truly no-touch (no support, no onboarding)
• Have clear upgrade triggers
• Not exist

Freemium works at scale. For early-stage startups, it often bleeds resources.

Mistake 5: Annual Discounts That Are Too Good

I offered 40% off for annual billing. Sounded generous.

Problem: Converted too many annual users too early. Locked in low prices. Couldn’t raise rates for a year.

Now I offer 17% off (two months free). Enough to incentivize without destroying unit economics.

Mistake 6: Not Raising Prices

I kept my launch price for 18 months. Adding features. Improving the product.

Finally raised prices 30%. Lost 2 customers. Gained 30% more revenue from everyone else.

Should have raised sooner.

Existing customers can stay on old pricing. New customers pay new prices. Simple.

Mistake 7: Per-Seat When It Should Be Usage

Charged per user. Enterprise customers with 50 employees balked at the math.

Switched to usage-based (per active project). Same revenue from SMBs, but enterprises could finally justify the spend.

Right pricing model depends on what customers actually value. Sometimes it’s access. Sometimes it’s consumption.

Mistake 8: Hiding Prices

I tried “contact us for pricing” once. Thought it would let me customize.

80% of leads disappeared at the pricing inquiry stage. People don’t want to talk to sales for a $50/month product.

Hide prices only if:

• You’re genuinely enterprise ($10,000+/year)
• You have a sales team to handle inquiries
• Your product requires customization

For self-serve SaaS, show prices. Transparency converts.

What I’d Do Today

Starting fresh, I’d launch with:

Tier 1: $29/month - Core features for individuals Tier 2: $79/month - More features for small teams Tier 3: $199/month - Everything for growing companies

Annual discount: 17%

Raise prices every 6 months until conversion drops, then back off.

Grandfather existing customers.

Test with actual customers, not assumptions.

The Uncomfortable Truth

You’re probably undercharging.

Most founders are. We’re afraid of rejection. We want growth. We price timidly.

But undercharging attracts price-sensitive customers who churn fast and demand more support.

Higher prices attract serious customers who value your product.

Start higher than you’re comfortable with. You can always offer discounts. You can rarely raise prices on existing customers.