Pricing Strategies For Online Products

Every time a card payment is processed, 𝘁𝗵𝗿𝗲𝗲 main types of fees are involved. Here’s a simple breakdown of the Three Core Fees: 1️⃣ Interchange Fee This is paid by your acquiring bank (or payment processor) to the cardholder’s bank (the issuer). It’s set by the card networks (like Visa and Mastercard; sometimes regulated), and is designed to cover things like fraud, credit losses, and infrastructure costs. 2️⃣ Scheme Fee Charged by the card networks themselves, this fee covers the operation of the payment system (“rails” that process the transaction). 3️⃣ Acquirer Markup This is the fee your acquirer or payment service provider (PSP) charges you, the merchant. It includes their costs, risk management, and profit margin for processing and settling the payment. The total cost a merchant pays is called the Merchant Service Charge, which is the sum of these three components. The Main Pricing Models: ► Bundled Pricing All fees are grouped into one flat rate. This is very common with small businesses. It’s easy to understand but doesn’t provide insight into what you’re actually paying for. ► Interchange+ The interchange fee and the acquirer’s fee are shown separately, but the scheme fee is typically bundled with the markup. This model offers some transparency. ► Interchange++ Each fee—the interchange, scheme, and acquirer markup—is itemized separately. This is the most transparent model and is favored by larger or multi-country merchants who want to track costs precisely. Who Chooses the Pricing Model? Most acquirers and PSPs decide what pricing model you’re offered. Unless you negotiate or have significant transaction volume, you’re likely to get bundled pricing by default. Larger or more experienced merchants who understand payments often push for Interchange++ for its clarity and fairness. Smaller merchants often aren’t aware that alternatives exist or find it difficult to compare offers. How Interchange Fees Vary Globally: Some regions (like the EU, UK, China, and Brazil) cap interchange fees to lower costs for merchants and stimulate competition. The US regulates only part of the system—such as capping debit card fees for large banks (the Durbin Amendment)—while credit card interchange remains uncapped and usually higher. Other countries, like India and Brazil, regulate interchange as part of broader financial inclusion goals. In markets with stricter regulation, merchants often benefit from lower, more predictable fees, making it easier to accept cards. Where fees are higher and less regulated, issuers can offer consumers more rewards (like cashback), but those costs are passed back to merchants—and sometimes their customers. Every model shifts the balance of costs and benefits between banks, merchants, and consumers in different ways. More info below👇, and I highly recommend reading my complete deep dive article about Interchange Fee and what factors impact the rate: https://bit.ly/44T4VJA

We're moving away from charging for *access* to software and toward a model of charging for the *work delivered* by a combination of software and AI agents. Let’s dive into what’s happening and what it means for you ⤵️ 1. The rise of disruptive AI pricing models Tech companies are realizing they can't solely rely on seat-based subscriptions in an age of AI, automation and APIs where value is disconnected with how many people are logging in. Perhaps Salesforce going all-in on Agentforce (and charging $2 per conversation) was the push the industry needed. Each product category has its own flavor of disruptive pricing. - Legal AI products might charge for a demand package generated by AI or an AI-generated summary. - Creator AI products might charge for the content that gets produced such as a video generation or amount of video created. - GTM products might charge for specific tasks completed or workflows executed by the AI. 2. Selling work, not necessarily success As a customer, I wish I only had to pay for software when it delivered results. But the reality is that true success-based billing won’t work for the vast majority of today’s products. Most products should charge for work output instead. The issue is attribution. You want the customer to get a fantastic outcome — and you want them to recognize that your product powered that outcome. As soon as you start charging for success, the customer begins to rethink the results. 3. Goodbye ARR as we know it? Shifting to these newer value-based pricing models isn't a simple pricing change you can just announce in a press release. It's a business model evolution that looks a lot like the shift from on-prem to SaaS in the first place. These new AI pricing models might mean greater volatility in both usage and spend. Variable margin profiles across products and customers. Seasonal revenue fluctuations. The potential for project-based, non-recurring use cases. Put simply, annual recurring revenue (ARR) continues to get dethroned. — Full post in today’s Growth Unhinged newsletter: https://lnkd.in/ea5eTrVD Things are about to get interesting 🍿 #ai #pricing #saas

The question I hear most from founders during Sequoia Capital's Arc program is about #pricing. Pricing is one of the most underutilized levers for startups. Why does it matter so much? It has the most direct impact on revenue, and the moment you establish your pricing, you determine your TAM. Getting the pricing metric right is, by far, the most important one. The key is to imagine the future: when you are a large and successful company, how have you changed the world, and what metric correlates best with your success? Hitch your financial wagon to that metric! If you are Figma, success is all designers using the app; therefore, the pricing metrics is per designer seat. If you are VMware, success is all workloads run in virtual machines; therefore, the right pricing metric would have been a virtual machine. A pricing metric is like the genie in a bottle: once you get it out, it is tough to rein it back or change it. The pricing model is about when and how frequently you charge. Recurrent subscriptions are the predominant model for SaaS apps, and usage-based pricing is the model for infrastructure solutions. Usage-based pricing creates a beautiful alignment of incentives but is less predictable. Upfront credit purchases and commitments are efforts to make usage-based practice more aligned with the rigid corporate budgeting processes. You can be the premium solution or the affordable one. Both are legitimate approaches. But your pricing needs to be consistent with the rest of your strategy: with your product and distribution channels.  You can’t have an affordable solution distributed through an expensive enterprise sales force. In this case, you need to sell either online or through inside sales—the product better be simple and the sales cycle quick. Many technical founders are shy about asking for a lot of money for their product. Don’t be. If customers like the product and it delivers value, they will gladly pay for it. Unless you hear customer complaints that you are expensive, then for sure you are underpricing. Calculate the ROI of your product, and take 20% of that value as your price point. How much it costs you to build the solution should not guide your pricing. But you should do a sanity check that you have a decent gross margin. Most companies start by selling a single package. Over time, they realize that different customer segments have different maturity levels and willingness to pay. To price discriminate between these segments, you need to introduce multiple packages.  Start by creating a customer maturity curve to inform your decisions on how many packages you need. The trick is to have the smallest number of packages to cover the broadest range of customer needs. Your packages will change and evolve quickly as your product matures. 

The price deadlock - where #Amazon Vendor margins go to die. 💸👇 Picture this: Amazon price matches a 3P Seller offering your product at a lower price. As a result, Walmart starts matching Amazon's price. A few days later, the 3P Seller runs out of stock. 🔓 𝗕𝘂𝘁 𝘆𝗼𝘂𝗿 𝗹𝗶𝘀𝘁𝗶𝗻𝗴 𝗶𝘀 𝗻𝗼𝘄 𝗹𝗼𝗰𝗸𝗲𝗱 𝗮𝘁 𝘁𝗵𝗮𝘁 𝗱𝗶𝘀𝗰𝗼𝘂𝗻𝘁𝗲𝗱 𝗹𝗲𝘃𝗲𝗹. Walmart price-matches Amazon. Amazon in turn price-matches Walmart. It's a price lock that hurts your margins across the entire channel. And exactly why a leaky distribution is the killer of your profit margins. So what can you do?* 1- Confirm the 3P Seller is out of stock 2- Consult your legal team for next steps 3- Raise a case in VC under “Amazon Retail Contributions → Pricing Issue → Competitor Price Match Error.” 4- Do the same with Walmart You may phrase it like: “Our analysis suggests your system may be referencing a temporary price on another retailer that’s no longer active. Please review whether this match remains valid.”* It's not a guaranteed fix for getting your product out of the deadlock. More often than not, you'll have to wait for either Amazon or Walmart until they take down the listing to protect their margins. 𝗪𝗵𝗮𝘁 𝘆𝗼𝘂 𝘀𝗵𝗼𝘂𝗹𝗱𝗻'𝘁 𝗱𝗼: 𝗚𝗶𝘃𝗲 𝗔𝗺𝗮𝘇𝗼𝗻 𝗼𝗿 𝗪𝗮𝗹𝗺𝗮𝗿𝘁 𝗮𝗻𝘆 𝗮𝗱𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗳𝘂𝗻𝗱𝗶𝗻𝗴. 𝗜𝘁 𝘄𝗶𝗹𝗹 𝗷𝘂𝘀𝘁 𝗸𝗲𝗲𝗽 𝘁𝗵𝗲 𝗽𝗿𝗼𝗱𝘂𝗰𝘁 𝗮𝗹𝗶𝘃𝗲 𝗮𝗻𝗱 𝗺𝗮𝗸𝗲 𝘁𝗵𝗲 𝗶𝘀𝘀𝘂𝗲 𝘄𝗼𝗿𝘀𝗲. To prevent this deadlock in the first place: Tighten your distribution control. If you sell to everyone, price becomes the only differentiator. --- How do you handle price deadlocks on Amazon?  Let me know in the comments! *Disclaimer: Not legal advice. Always consult your legal and compliance teams before taking action. Pricing at all times at the sole discretion of the retailer. #amazonvendor #amazonstrategy

"All vendors look the same. We're choosing based on price." When prospects say this, most reps panic and start discounting. My client John didn't. Here's exactly how he flipped the dynamic. The real problem… You've been lumped into the "sea of sameness." This happens when your discovery was surface level and you didn't create a big enough gap between current state and future outcome. The isolation strategy… Instead of arguing, John asked: "What if all three vendors had the exact same price and contract terms? How would you decide then?" This forces them to reveal their real decision criteria beyond price. When they still stonewall… John used the mirror technique: "In your consulting practice, are you the cheapest option?" They said no. "What would a competitor have to cut out to offer you 50% less than you charge?" Now THEY'RE explaining why cheap doesn't work. Worse talent, bad service, no expertise. The bridge back… "That's no different than our industry. We all have similar cost structures. If someone's doing it cheaper, they're cutting corners somewhere." "Is that really a risk you want to take when scaling beyond Sweden?" The reframe… "You're not buying our service. You're buying certainty that the project works. Visas get processed, onboarding happens on time, no hidden surprises." Prevention is better than cure… The best way to avoid price wars is killer discovery upfront. Uncover current state pain, cost of inaction, future desired outcomes. When you create a big enough gap, price becomes secondary. Keep in mind, the person who wants the deal most usually loses. Stay detached. Be willing to walk away. You have two choices… compete on price and race to the bottom or compete on value and win TOP deals. — Want to see more of how my client John tackles pricing objections, check out our coaching session here: https://lnkd.in/gbBjgxxS

Your pricing page is the second most viewed page on your website. Yet, most pages fail to convince users to buy. I’ve spent 100s of hours running price experiments… Here are the 5 principles to make your pricing page so irresistible that it sells itself: — 𝗢𝗡𝗘 - 𝗖𝗼𝗻𝘃𝗲𝘆 𝗬𝗼𝘂𝗿 𝗠𝗼𝗱𝗲𝗹 Ask yourself: → What’s the pricing structure? → Who’s the right audience for each plan? → Why should someone choose this plan? If your users can’t answer these questions immediately, you’re losing them. → Talk to your users. Find out what’s confusing. Fix it. → Make your plans make sense because a confused mind never buys. — 𝗧𝗪𝗢 - 𝗪𝗵𝗮𝘁 𝗪𝗼𝗿𝗸𝘀 𝗙𝗼𝗿 𝗢𝘁𝗵𝗲𝗿𝘀 𝗠𝗮𝘆 𝗡𝗼𝘁 𝗪𝗼𝗿𝗸 𝗙𝗼𝗿 𝗬𝗼𝘂 Copying your competitor’s pricing page might seem tempting. But it’s a shortcut to failure. Here’s what you should do: → Dig into your user research. Prioritize experiments that solve your audience’s specific pain points. → Skip the “growth hacks” that pile up downstream problems for sales or support. Your users are unique. Treat them that way, and your results will be too. — 𝗧𝗛𝗥𝗘𝗘 - 𝗟𝗲𝘃𝗲𝗿𝗮𝗴𝗲 𝗧𝗵𝗲 𝗣𝗿𝗶𝗻𝗰𝗶𝗽𝗹𝗲𝘀 𝗼𝗳 𝗕𝗲𝗵𝗮𝘃𝗶𝗼𝗿𝗮𝗹 𝗣𝘀𝘆𝗰𝗵𝗼𝗹𝗼𝗴𝘆 Your pricing page isn’t about what you’re selling. It’s about how you’re selling it. Use psychology to guide decision-making: → Offer three plans: good, better, best. → Highlight the one you want them to choose. → Include a free option; it’s a no-brainer for undecided users. → Use the decoy effect: make your premium option shine by comparison. These aren’t just tricks. They’re time-tested ways to make decisions easier for your users. — 𝗙𝗢𝗨𝗥 - 𝗦𝗶𝗺𝗽𝗹𝗶𝗳𝘆 𝗙𝗼𝗿 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗔𝗻𝗱 𝗔𝗱𝗱 𝗠𝗼𝗿𝗲 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝗘𝗹𝘀𝗲𝘄𝗵𝗲𝗿𝗲 Your pricing page doesn’t need to say everything. And don’t make users “work” to understand your pricing. → Start clean: clear plans, clear benefits, and add depth where it counts. → Use FAQs and deeper sections for additional details further down. → Think Apple: clean, focused, and easy to understand, with details available when needed. — 𝗙𝗜𝗩𝗘 - 𝗢𝗽𝘁𝗶𝗺𝗶𝘇𝗲 𝗙𝗼𝗿 𝗨𝘀𝗲𝗿 𝗦𝘁𝗮𝘁𝗲 Your users are in different stages of their journey. So your pricing pages should tailor to their experience with your pricing page. Here’s what to do: → New visitors? Show them why you’re the best choice. → Returning users? Highlight what’s new or offer a discount. → Existing customers? Nudge them toward upgrades tailored to their usage. Also, a little personalization will go a long way: → Use their language, their currency, their context, etc. — Want to dive deeper with 6 best pricing page breakdowns and top experiments of my career? Go here: https://lnkd.in/dvBxfY_q

As we approach the New Year—a perfect time for adjustments—many companies handle price increases much like the guy in the photo: underprepared and hoping for the best. But increasing prices doesn't have to be a risky gamble. Here's how to carry your "eggs" safely into 2025 with an effective price increase strategy: 1️⃣ Strategic Planning Price increases require careful calculation: ➡️ Market Analysis: Understand industry trends. If raw material costs have risen due to supply chain issues, acknowledge how this impacts pricing. ➡️ Competitive Landscape: Know your position. If competitors are also raising prices, align your strategy to prevent customer loss. ➡️ Value Assessment: Evaluate your unique offerings. Highlight enhancements or superior services that justify the increase. 2️⃣ Transparent Communication Honesty builds trust: ➡️ Advance Notice: Inform customers ahead of time to show respect and allow budget adjustments. ➡️ Explain the Reasons: Clearly state why the increase is necessary—be it higher costs or improved services. ➡️ Highlight Continued Value: Emphasize the quality and benefits they continue to receive. 3️⃣ Customer Segmentation Tailor your approach: ➡️ Identify Segments: Classify customers by purchase habits and price sensitivity. ➡️ Customized Strategies: Apply different adjustments. Loyal customers might see a smaller increase or receive added perks. ➡️ Offer Alternatives: Provide options like bundles or loyalty programs to add value. 4️⃣ Train Your Team Your employees bridge strategy and customer experience: ➡️ Internal Briefings: Explain the rationale so they can convey it confidently. ➡️ Provide Tools: Supply scripts and FAQs to handle inquiries consistently. ➡️ Encourage Feedback: Let staff share customer reactions to inform future strategies. 5️⃣ Monitor and Adapt Stay agile post-implementation: ➡️ Track Data: Watch sales and retention rates closely. ➡️ Gather Feedback: Seek opinions through surveys and direct conversations. ➡️ Be Flexible: If negative impacts arise, adjust your strategy—perhaps with promotions or reevaluated pricing. Don't let your price increase strategy be an accident waiting to happen. With careful planning and execution, you can strengthen your business without risking customer relationships. Let's carry our "eggs" safely into the New Year! 🥳 How are you adjusting your pricing strategy for 2025? Share your insights below! How 2025 will be different to previous years? ----- 📢 Curious about navigating the dynamic world of pricing and staying ahead of the curve? Hit the 🔔 icon and follow me to receive timely updates on pricing strategies, industry trends, and more!

Anchoring won’t fix your pricing page, but this will… Pricing is the second most visited page on any SaaS website, but most pricing advice misses the point. While everyone obsesses over psychology tricks like "end in 0.99" or "use anchoring," they miss something crucial: Those tricks only work if someone's already sold. In reality, most visitors aren’t ready to buy – they’re still figuring out your product. Therefore, pricing pages convert best when they demonstrate your value clearly, even if it seems repetitive. The best pricing pages do 3 things: 1. Lead with the outcome: Instead of a generic “Choose your plan” headline, show what customers actually get, e.g. “A/B test landing pages without coding” or “Generate fresh ad creatives in minutes based on your previous winners.”     2. Price for value, not access: Instead of charging per seat, price based on work delivered, (e.g. pages tested, ads generated). That way, every tier reminds them of the value they’ll get.     3. Answer objections directly: Add an FAQ addressing your prospects’ top 3-5 fears head-on. (Your sales team knows these by heart). Examples: “Will my team adopt a new tool?” or “Are we charged for unused credits?” Want a great example? Check out Leadsie's pricing page (Screenshots below) Helpful? Follow me to keep seeing my posts. Matt Lerner

Pricing and packaging is, IMO, the most underutilized, highest leverage tactic available to founders to make an impact on sales. At Gigya, we started with $10K ACVs and 5 years later were at $250K ACVs, largely due to improvements in pricing and packaging. Unfortunately, there is not much out there on the right way to approach pricing / packaging. Further, AI-based software, especially AI agents & teammates, are disrupting the old models. Specifically, the usual 'per seat' SaaS pricing model is no longer quite relevant when the software is doing alot of the work humans used to do. To help, I've outlined 5 core pricing & packaging pillars for (AI) startups: 1. Platform Pricing (flat or tiered) 2. Seat-Based Pricing (familiar, but can punish success if AI replaces seats) 3. Consumption-Based (pay-as-you-go, works well with AI compute) 4. Add on Pricing (A la carte features, with big upsell potential) 5. Outcome-Based (ultimate alignment, but hard to measure + forecast) Key takeaway: Think about how your product delivers ROI - then tie your model to that. It's probably going to be using a combination of these pricing strategies. Keep in mind what approaches are most likely to maximize value capture upfront (average contract value) and over time (net dollar retention). As a rule of thumb, aim for net dollar retention in the 120-140% to be best in class. Would love to hear your take - what's working (or not) in pricing, especially in this new AI software world?

The 5 Levels of Discussing Pricing on Your Website (Which One Are You?)👇 👉 Level 0: You have a "get pricing" button that leads to a contact form. That's it. (Translation: You're making visitors jump through hoops, creating frustration and lost opportunities before the conversation even begins.) Note: This is "Level 0" because you haven't actually done anything to help your prospects. You don't get credit for putting up barriers. 👉 Level 1: You have a comprehensive pricing page that educates visitors about your industry's pricing landscape. It answers the crucial questions: What drives costs up or down? Why do prices vary so dramatically between providers? What's your typical price range? Note: In this level, you're not giving your exact pricing. But you're teaching the buyer what "value" looks like in your niche. Simply reaching Level 1 puts you in the top 10% of your industry for trust and transparency. Yet so few companies take this basic step. 👉 Level 2: Building on Level 1, you create detailed pricing videos for each major product or service. These videos SHOW prospects exactly what influences their costs, making complex pricing structures crystal clear. Note: Level 2 positions you in the top 3% of your industry. Video builds trust in ways text alone never can. 👉 Level 3: After mastering Levels 1 & 2, you implement a pricing estimator tool. This is a game-changer – visitors can instantly understand their likely investment, and you'll see your leads increase by up to 300% simply because you're willing to be transparent about costs. Note: With tools like PriceGuide.ai, any business can add a professional pricing estimator in under 30 minutes, instantly joining the top 1% of their industry in transparency. 👉 Level 4: The pinnacle – displaying exact prices for your products or services. While this isn't feasible for every business model, those who can achieve it win massive trust and conversion advantages. It's the ultimate expression of pricing confidence. The question isn't just where your company falls on this scale – it's how quickly you'll move up to the next level while your competitors hide behind "contact us for pricing." And remember, EVERY company can (and should) do Level 1 & 2. Most companies can easily do Level 3. Some companies can do level 4. So the question is, where does your company stand? And more importantly, where will it be six months from now?