How to Price Your Product

Pricing Your Product: A Practical Guide

Pricing is hard. Most founders underprice. Here's how to think about it.

Pricing Psychology

Value-Based Pricing

Price based on value delivered, not cost to produce.

Example: If your tool saves 5 hours/week, that's worth $100+/month to many businesses (5 hours × $50/hr = $250 value).

The 10x Rule

Your product should deliver 10x its price in value. If you charge $50/month, deliver $500+ in value.

Pricing Models

Subscription (SaaS)

• Pros: Predictable revenue, customer lifetime value
• Cons: Must continuously deliver value
• Best for: Software, ongoing services

One-Time Purchase

• Pros: Simple, no ongoing obligation
• Cons: Need constant new customers
• Best for: Digital products, courses, tools

Freemium

• Pros: Low barrier, viral potential
• Cons: Most users never pay
• Best for: Products with network effects

Usage-Based

• Pros: Scales with customer value
• Cons: Unpredictable revenue
• Best for: APIs, infrastructure

How to Set Your Price

Step 1: Research Competitors

• What do similar products charge?
• What's included at each tier?
• Where are the gaps?

Step 2: Understand Your Customer

• What's their budget?
• What's the value to them?
• What are they paying now?

Step 3: Start Higher Than You Think

• You can always lower prices
• Raising prices is harder
• Early customers aren't price-sensitive

Step 4: Create Tiers

• Starter: Entry point, limited features
• Pro: Most features, best value
• Enterprise: Everything + support

Common Pricing Mistakes

1. Pricing Too Low

• Attracts wrong customers
• Unsustainable business
• Hard to raise later

2. Too Many Tiers

• Confuses buyers
• 3 tiers is usually ideal

3. No Free Tier (or Too Generous)

• No free = higher barrier
• Too generous free = no reason to pay

4. Competing on Price

• Race to the bottom
• Compete on value instead

5. Not Testing

• A/B test prices
• Ask customers directly

Pricing Page Best Practices

Highlight the Best Value

• Make one tier "Most Popular"
• Usually the middle tier
• Best margin for you

Anchor High

• Show expensive option first
• Makes middle tier seem reasonable

Annual Discount

• Offer 15-20% off annual
• Improves cash flow
• Reduces churn

Clear Feature Comparison

• What's in each tier?
• Use checkmarks and X's
• Highlight key differences

Pricing Examples

Micro SaaS ($10-50/mo)

• Simple, focused products
• Solo users or small teams
• Limited support needed

SaaS ($50-200/mo)

• More features
• Teams and businesses
• Support included

Enterprise ($500+/mo)

• Custom features
• Dedicated support
• SLAs, compliance

When to Change Prices

Raise Prices When

• Customers say it's cheap
• You're growing fast
• You add significant value
• Competitors charge more

Lower Prices When

• Can't get customers
• Feedback says too expensive
• Testing shows higher conversion

The Spawned Model

On Spawned, products can monetize through:

• Subscriptions: Traditional pricing
• Token trading fees: 0.30% on every trade
• Both: Hybrid model

Token fees provide revenue from day one, even before traditional customers pay.

Key Takeaways

1. Price based on value, not cost
2. Start higher than you think
3. Use 3 tiers (usually)
4. Test and iterate
5. You're probably underpriced