Pricing strategy: How to stop undervaluing your work (+examples)

How the right pricing strategy can save your business

Analyzing hundreds of digital products from creators and startup founders, we’ve come to some surprising conclusions. The vast majority of products are priced so low that, at first glance, it’s clear the venture will either be barely profitable or end in failure.

Everyone wants to earn more - after all, that’s why we sell. So why do we sabotage ourselves with undervalued pricing?

When asked about their pricing approaches, creators often respond with "an educated guess". The second most common answer is, “That’s what the competition charges.” Both approaches are flawed and often disastrous.

I can’t shake the feeling that online business owners focus on the wrong part of the funnel, burning money on ads and sales while the real money is elsewhere.

Let me be clear: your product’s pricing is the MOST IMPORTANT factor in increasing your earnings.

‍Combined with a seamless purchasing process, it’s the key to doubling your revenue - yes, doubling. If that interests you, keep reading.

Product pricing strategy vs. creators’ complexes

Talking to creators, I often get the impression they struggle with deep-seated insecurities. How else can you explain pouring thousands of hours into a project only to price it at, say, $19? ‍

Here’s a secret: as a creator, you will always undervalue your product.

‍Why? Hard to say, but it’s common - we feel our knowledge isn’t complete, that things could be better. As a result, we price our products about twice as low as we should.

These insecurities are often reinforced by faulty comparisons to entirely different market segments. Example: “Netflix costs only $22.99/month for premium access and offers thousands of amazing movies and shows. That’s immense value for a tiny price, so my product can’t cost as much as Netflix.”

Wrong!

‍Netflix has millions of subscribers and makes a fortune. You, selling your hard work to a much narrower audience, must charge more - and no one will hold it against you.

This leads to the first fundamental rule: you need external input to price your product correctly.

Working on your pricing strategy? Ask for feedback!

At first, this could be as simple as asking your mom, but ultimately, you should ask your customers. How? Directly, but with a twist. Asking, “How much would you pay for this?” often triggers a defensive response, as if someone is trying to take advantage of us.

Instead, ask:

• At what price would this product be too expensive for you to consider buying?
• At what price would it seem too cheap to be of good quality?
• At what price would it feel slightly expensive but still worth purchasing?
• At what price would it seem like a great deal?

By comparing these numbers, you can determine the optimal pricing range. Alex Hormozi breaks it down visually in this video:

From my experience, most creators and founders never ask their customers these questions. I don’t need to explain what a huge mistake that is.

Besides asking customers, here are some questions to ask yourself to determine if you’re underpricing:

• Have you not raised prices in the past year?
• Is your product better today than when you set the price?
• Has anyone ever told you your product is too cheap?
• Do you sometimes feel exhausted by your customers?
• Do you feel embarrassed about setting a higher price?

If you answered YES to at least one, it might be time to raise your prices.

What are pricing strategies?

Before you choose the most effective pricing strategy for your product, let’s take a quick step back and get on the same page about what a pricing strategy actually is.

A pricing strategy is the method a business uses to decide how much to charge for its product or service. It balances factors like costs, market demand, customer profiles, competition, and business goals.

The most common methods for pricing your product include:

• Cost-plus pricing: Add a markup to the cost (e.g., build for $50, sell for $75).
• Competitive pricing: Set the price based on what competitors are charging for similar products or services.
• Value-based pricing: Charge based on perceived value (e.g., software that saves 1,000/month might be priced at 300/month).
• Penetration pricing: Start low to gain market share, then raise prices.
• Premium pricing: Set high prices to signal quality or exclusivity.
• Price skimming: Launch with high prices and drop them over time as competition grows or demand decreases.
• Psychological pricing: Influence buying decisions by appearing lower or more attractive
• Bundle pricing: Combine multiple products into one offer at a lower total price (e.g., “3-in-1 course bundle for $199”).
• Tiered pricing: Offer multiple plans with increasing features to guide customers to the mid or top tier.
• Charm pricing: Use numbers like .99 or .95 to make prices feel cheaper (e.g., $49.99 instead of $50).
• Dynamic pricing: Adjust prices in real time based on demand, user behavior, or other factors (common in travel or e-commerce).

Let’s explore some of them to see what type of pricing works best for your business.

7 most common pricing strategies

Now that we’ve covered the basics, let’s explore the most effective pricing strategies. Simply thinking more deeply about pricing will put you ahead of most people. But truly understanding common pricing strategies will help you maximize revenue.

There are many pricing techniques, each worth considering to find the ideal price-value balance. Let’s look at seven most common approaches.

[fs-toc-omit] 1. Cost-plus pricing

This method involves calculating all costs associated with creating and selling your product, then adding profit margins - say, 20%.

This can be a good starting point, especially for SaaS, where you have fixed hosting costs. It also works for creators selling online courses, though it doesn’t account for years of experience that went into making them.

A simple exercise:

• Decide how much you want to earn per hour.
• Multiply by the hours spent creating your product.
• Estimate how many customers will buy it.
• Divide your expected revenue by that number.

Even this rough estimate will give you a better pricing perspective.

However, this model has a major flaw - it ignores the most important factor: the customer’s perspective. And that’s what ultimately determines customers’ willingness to pay for your product. So let’s move on.

[fs-toc-omit] 2. Competitive pricing

Most people use this model: they check competitive pricing strategy and set theirs slightly lower. While this can work, it’s not ideal.

First, it leads to a race to the bottom, where businesses undercut each other until everyone suffers. Second, it only applies to non-unique products. If your product offers real value and unique features, competitive pricing is usually a mistake.

Still, researching competitor prices helps ensure your pricing isn’t completely out of touch with the market.

[fs-toc-omit] 3. Value-based pricing (the holy grail)

The gold standard is pricing strategy based on the value your product delivers. This can be measured in two ways:

a) Time saved
b) Money saved or earned

For example, if your product saves someone 10 hours of work, and their hourly rate is $100, it’s worth at least $1000 to them. A common rule of thumb: price your product at 1/10 of the value it provides. If it helps someone make $1000, price it at $100.

This approach ensures you focus on customer value, which is the best pricing metric.

If you want to dive deeper into crafting a strong value proposition and building a product people actually want to buy, here’s a 90-minute masterclass from Harvard that breaks down the process in detail:

[fs-toc-omit] 4. Penetration pricing (start low, grow later)

This strategy means launching with a lower-than-usual price to attract users fast. It’s all about lowering the barrier, building momentum, and grabbing market share early.

A classic example?

Amazon Prime. It started as a low-cost bundle - shipping, streaming, perks - all for one simple annual fee. Not just cheaper than competitors, but packed with value to get people in the door.

As the product matured, the price went up. But by then, users were already hooked.

Use this if:

• You’re entering a crowded market
• You can afford short-term losses
• Your product has strong retention potential

It’s a long-game play: start lean, scale fast, then grow pricing with your value.

[fs-toc-omit] 5. Premium pricing

This one’s about pricing above the market to signal quality, exclusivity, or innovation. It works when your product stands out and your brand backs it up.

Think of:

• Software with advanced features
• Exclusive online courses
• Subscriptions with premium perks

The goal? Attract customers who value quality over savings. You're not trying to compete on price - you’re competing on perceived value.

This strategy only works if your product truly delivers. But if it does, more premium pricing helps build a loyal customer base that’s happy to pay more.

[fs-toc-omit] 6. Price skimming

Start high, then lower over time. That’s price skimming - perfect for early adopters who crave exclusivity and are happy to pay for it.

Example of price skimming?

• A new SaaS tool launching at $99/month, then rolling out $29 or freemium plans later
• Premium online courses or digital art sold at launch for $300+, then discounted or opened up as demand grows
• Adobe Creative Cloud launching at a premium, followed by student and scaled-down plans

Why price skimming works?

• Maximizes early revenue
• Recovers upfront costs
• Builds prestige and scarcity

But be careful - always clearly communicate why pricing is changing, reward early adopters with perks and double down on quality and unique value. That way, even at a lower price, your brand still feels premium.

[fs-toc-omit] 7. Psychological pricing

This isn’t exactly a pricing model - psychological pricing it’s more of a set of tactics that shape how people perceive price and value.

It taps into cognitive biases to guide decisions, boost conversions, and make your pricing feel more appealing.

In SaaS, common tactics include:

• Three-tier pricing with a high decoy plan to make the mid-tier more attractive
• Anchoring: showing the most expensive plan first to make others seem like a deal
• Feature gating: limiting key features in lower plans to nudge upgrades

For digital creators:

• Pricing at $29.99 instead of $30 - small difference, big impact on perception
• Urgency boosters like “save 20% today only” or limited-time bundles
• Highlighting plans as “Most Popular” or “Best Value” to guide choices

Used well, these tactics can lift conversion rates and average revenue per customer - without changing your actual pricing. It’s about aligning your offer with how people actually decide.

Want a deeper dive? Check out our full breakdown on psychological pricing.

Pros and cons of different pricing strategies

The 10-5-20 rule

If you estimate the value your product provides, price it at 1/10 of that value. Then, experiment:

• Raise prices by 5% at a time.
• Stop when 20% of customers refuse to buy due to price.

A real-world example: restaurants in Dubrovnik raised prices by 20% annually until revenue started dropping. Some call it price gouging, but it’s really just strategic pricing in action.

How many sales to make $100,000?

This simple breakdown can shift your mindset:

• $10 product → 10,000 buyers
• $100 product → 1,000 buyers
• $1,000 product → 100 buyers
• $10,000 product → 10 buyers

Think about your actual target audience size and the value you provide. This will help you set a price that aligns with your financial goals.

Offer multiple price points

One of the best ways to increase revenue is to create multiple product tiers. Netflix does this with its multi-room plan, which costs them almost nothing to offer but generates significant extra revenue.

For a course, instead of one price, offer:

• Basic plan
• Premium plan (with consultations or extras)

Three pricing tiers tend to work best. You can also introduce subscriptions for even greater revenue stability.

Increase revenue with subscriptions

No matter which pricing strategy you choose, offering your products as a subscription has numerous benefits. When well-implemented, it almost always leads to higher long-term revenue and greater stability.

However, the downside is that subscriptions take time to generate results. Typically, they require a few months to start showing significant returns.

Since subscriptions often mean a lower upfront payment, they’re best introduced as an upsell. What do I mean?

When I created one of my products - SystemFlow - I could have chosen a subscription model. However, that would have meant setting the price point at around $10/month.

To earn $30,000, I would have needed 300 customers paying for 10 months.

Instead, I introduced three pricing plans, with an average price of 300. This allowed me to reach 30,000 in the first month alone!

Just because I offered a lifetime access plan doesn’t mean I excluded the possibility of a subscription model. Quite the opposite - I can now introduce additional features as part of a subscription, such as hosted scripts.

Since customers have already paid $300 on average, they’ll likely be willing to pay a small recurring fee for valuable add-ons.

Experiment with product pricing

As you’ve probably noticed, I strongly advocate for experimenting with pricing and gradually increasing it. Products evolve, improve, and naturally become more expensive over time.

While I’m not a big fan of random discounts, no one complains when a washing machine they bought is 20% off a few weeks later.

So, you shouldn’t be afraid of temporary discounts or promotions - or of raising prices.

However, it’s crucial to communicate price changes properly and avoid misleading phrases like “This is the lowest price ever!”

For subscriptions, customers will generally accept occasional discounts. But over time, frequent promotions can cause problems. Instead of hiding price changes, offer existing customers small bonuses so they don’t feel left out.

One key takeaway: it’s always easier to raise prices than to lower them.

For subscriptions, this is even more powerful - customers who secured a lower price will be less likely to cancel, knowing that returning later will cost more.

Why free plans can kill your pricing strategy

Offering a free trial can be a great way to increase revenue and attract customers. But that’s very different from a freemium model, where part of your product is permanently free.

While there are exceptions, I generally advise against free plans.

Why?

1. Free plans aren’t free for you. Even if delivering digital products has low costs, free users still require support, which can get expensive.
2. People take free things even when they don’t need them. This leads to low engagement and wasted resources.

If you’re still unsure, I recommend reading “Better than Free”, an article that explains what makes digital products valuable to customers.

It highlights factors like:

• Immediacy – Customers are willing to pay for instant access, even if the product will eventually be free.
• Personalization – Customized products feel more valuable, so people are willing to pay more.
• Interpretation – Offering a cheap product but charging for premium support.
• Authenticity – A seamless user experience increases perceived value (think iOS vs. Android).
• Convenience – People pay for hassle-free access (e.g., iCloud backups).

One more reason to charge more

Here’s something I’ve learned over the years: a customer who pays $10/month is completely different from one who pays $100 or more.

If you analyze support requests, you’ll notice that the cheapest customers generate the most questions and complaints. They’re also the most likely to leave for a cheaper competitor the moment one appears.

Ultimately, it’s your choice, but I believe you should price your product for the customers you actually want. A customer who pays $1000 or more understands the value of your product, will engage more actively, and will help you improve it.

This is why I decided to keep eduweb.pl as a small, high-quality platform, even when I had a “too good to refuse” offer to sell it and pivot to B2B training. I knew that corporate clients, while paying slightly more overall, would demand customized solutions, bulk discounts, and complex licensing agreements.

That wasn’t the direction I wanted to go.

So here’s the hard truth: If you plan to charge low prices, you will earn little.

Many creators and startups try to be the next Netflix, pricing their products similarly. But that’s a terrible strategy.

A few tricks to help you increase your pricing

Now that you know you can charge more for your products - and that doing so will likely have only positive effects - let’s explore some pricing tactics to help you maximize revenue.

[fs-toc-omit] 1. Price higher, then offer discounts for early buyers

While I generally don’t recommend discounts, a well-justified discount is much better than a random sale like “Halloween Special -20%!”

Instead, offer early adopters a lower price for a limited time.

This works even for existing products - just introduce a new feature and offer early access at a discount.

[fs-toc-omit] 2. Offer multiple pricing plans

We already agreed that only offering one price point may cause you lost revenue. Always try to have at least three pricing tiers.

Additionally, consider different pricing for different customer segments - for example, individual users, businesses, and enterprise clients.

This allows you to capture more revenue from customers who are willing to pay more.

[fs-toc-omit] 3. Align pricing model with value delivered

Think about how Stripe operates—they don’t charge a fixed fee but take a small percentage of each transaction.

This means that as their customers earn more, Stripe earns more.

It’s a win-win, and customers are happy to pay because the pricing is fair.

[fs-toc-omit] 4. Adjust prices based on target market

If you sell internationally, consider regional pricing based on purchasing power.

For example, you can charge less in developing countries while raising prices in wealthier markets like the US and UK.

The result? Higher overall revenue.

[fs-toc-omit] 5. Guide customers toward the best plan

People like having options, but they also appreciate guidance.

Highlight your recommended plan on your pricing page to subtly steer customers toward the best choice.

[fs-toc-omit] 6. Increase perceived value

Customers perceive higher value when they feel they truly own something.

For example, allow users to customize their product (colors, logos, etc.). Even small customizations increase emotional attachment, making customers more willing to pay.

This is why IKEA furniture feels more valuable - because customers assemble it themselves!

[fs-toc-omit] 7. Offer less to increase sales

Too much choice can be overwhelming.

Netflix knows this, which is why they introduced a Shuffle Play button - to help users avoid decision fatigue.

Instead of overloading customers with features, focus on delivering value.

How Easytools helps you test different pricing approaches

Easytools allows you to quickly create a checkout with various pricing options: one-time payment, subscription, payment plan, PWYW (Pay-What-You-Want) or lead magnet.

You can also offer multiple models within the same checkout - e.g., a one-time purchase of a 1-hour coaching session or a subscription for 10 hours of coaching per month. This is a great way to track your clients’ preferences.

Additionally, you can easily experiment with discounting strategy, display the original price, or create limited-time promos - all within a single subscription and platform.

How to choose the best pricing strategy

Now you (hopefully) understand the importance of pricing strategy for your business. And unfortunately - there are no shortcuts here. If you want to earn decent money for your work while keeping a competitive advantage, you need to keep experimenting.

Setting your pricing strategy isn’t a one-time job - it’s an ongoing process you should revisit regularly, whether to reflect market conditions or respond to customer feedback.

Hopefully, this guide helps you do that - without stressing about being “too expensive.” And remember what I said? There’s a good chance you’re charging too little. The sooner you check that, the better for your business.

Pricing strategies FAQs

[fs-toc-omit] 1. What are the types of pricing strategies?

The most common (and most effective) pricing strategies for digital products and services include:

• Cost-plus pricing
• Competitive pricing
• Value-based pricing
• Penetration pricing
• Premium pricing
• Price skimming
• Psychological pricing

[fs-toc-omit] 2. How do I choose a pricing strategy that works?

It depends on your business stage, how well you know your customers, and whether you’ve done market research. Start with a strategy that fits your product and business model, then run experiments to find the sweet spot.

[fs-toc-omit] 3. Is it ethical to use psychological pricing techniques?

It can be - if your goal is to guide users toward better choices or highlight value. But if it’s just to boost profits without delivering real value, it can backfire.

[fs-toc-omit] 4. Can I combine different types of pricing?

Absolutely. You can pair value-based pricing with tiers or bundles, or use cost-based thinking to set floors for dynamic pricing. Most solid pricing setups blend a few approaches.