Three anchors, not a formula
There's no calculation that produces a correct first price. There are three reference points, and a defensible price sits somewhere they overlap.
- What it replacesHours of someone's time, a competitor's subscription, a freelancer's fee. If your product saves six hours a month, the value of six hours is a floor you can talk about honestly.
- What alternatives costNot to match them, but to know what number your buyer already has in their head. Being three times a familiar price requires an explanation; being ten per cent above requires none.
- What it costs you to serve one customerInfrastructure plus the support they'll need. This is a hard floor — below it, growth makes things worse.
Why underpricing hurts
Almost every first price is too low, set out of a fear that nobody will pay. The damage isn't only the missing revenue.
- A very low price signals a small product. Buyers use price as evidence of seriousness, especially when they can't evaluate the software
- It attracts the most demanding customers. Cheap tiers reliably generate the most support per rupee earned
- It removes your ability to serve people well — you can't afford the support the price implies you'll give
- It's harder to raise a price than to lower one, and lowering is always available
- It hides whether the product is actually valuable. If it sells at a trivial price, you've learned nothing
Testing a price before committing
- Say the number out loud in a conversation"It's ₹2,000 a month" and then stop talking. The reaction in the next three seconds is data you can't get any other way.
- Ask what they expected"What were you expecting it to cost?" before you say your number is even better, and it's a normal question.
- Try to take a deposit or a first monthAgreement is free. A payment is the only test that resolves.
- Offer a founding rate with a stated end"₹1,500 for the first year because you're early, then standard pricing" lets you start low without permanently anchoring low.
- Watch which tier people chooseIf everyone picks the cheapest, the tiers aren't differentiated on something they value.
Publish a price rather than negotiating each one. Different customers on different secret prices becomes unmanageable quickly and is impossible to explain when they eventually compare notes — which they do.
Raising a price later
You will need to. The dread around it is mostly about how it's done, not about the increase itself.
- Change the price for new customers first, and watch conversion for a month before touching anyone existing
- Grandfather early customers, at least for a defined period. They took a risk on you, and honouring that is cheap and remembered
- Give at least a month's notice, in a direct message from a person, not a banner
- Say what changed — what's been added since they signed up. "Costs have risen" is about you; "here's what you now get" is about them
- Expect some churn and decide the acceptable amount in advance, so a normal outcome doesn't read as a disaster
Common mistakes
- Pricing from your costs rather than from the value delivered
- Setting a price so low it signals the product is unserious
- Negotiating a different secret price with every early customer
- Never testing the number in a real conversation before publishing it
- Raising prices for everyone at once, with no notice and no explanation
Key takeaways
- Three anchors: what it replaces, what alternatives cost, what it costs to serve
- Almost every first price is too low, and the damage isn't only revenue
- Say the number out loud to a real buyer and watch the next three seconds
- Raise for new customers first, grandfather the early ones, give notice from a person
Try it yourself
Estimate how many hours a month your product saves one customer, and multiply by what an hour of their time costs. Compare that to your price. If your price is a small fraction of it, you have room — and evidence to justify it.