Every first-time founder I have worked with has priced their product too low. Not some of them. Every single one.
The reasoning is always the same: “I’ll start cheap to get customers, then raise prices later.” This sounds sensible. It is a trap.
Low prices attract price-sensitive customers who will leave when someone cheaper appears. They signal low quality. They crush your margins, leaving nothing for marketing, support, or improvement. And raising prices on existing customers — the plan that makes this strategy sound viable — is one of the most painful things a founder can do.
The counterintuitive approach works better: start higher than you think. Then test down if needed.
Why You Underprice
Three psychological mechanisms drive underpricing.
The imposter effect. You compare your product to established competitors and feel your product is not “worth” as much. But your product is not competing against their product — it is competing against the customer’s problem. If the problem costs EUR 500 per month and your product eliminates it for EUR 50 per month, the price is not about your product’s quality. It is about the value of the solution.
Cost-plus thinking. “My materials cost EUR 10, so I’ll charge EUR 25.” This is how commodities are priced. You are not selling a commodity. You are selling a solution, an experience, a result. Price against the value to the customer, not the cost to you.
Fear of rejection. A low price feels safe. If someone says no to EUR 15, it feels less personal than if they say no to EUR 75. But the rejection at EUR 15 and the rejection at EUR 75 feel exactly the same — and the sale at EUR 75 gives you five times the revenue, five times the margin, and five times the ability to serve that customer well.
The Start-High Framework
Here is the pricing process I use with every founder I work with.
Step 1: Identify the customer’s alternative. What does the customer currently do to solve this problem? How much does that cost them in money, time, and stress?
If they are paying EUR 200/month for a competitor’s tool, your floor is somewhere below EUR 200 (unless you are clearly superior). If they are spending 10 hours/month on a manual workaround and their time is worth EUR 50/hour, the problem costs them EUR 500/month.
The customer’s alternative is your pricing anchor. Your price should be significantly below the cost of the alternative — enough to make the switch an obvious win.
Step 2: Set your initial price at 2x what feels comfortable. This is not scientific. It is a corrective for the underpricing bias. Whatever price makes you slightly nervous is probably closer to the right price than whatever price feels safe.
If you would feel comfortable charging EUR 29, start at EUR 59. If EUR 49 feels right, try EUR 99. The worst that happens is people tell you it is too expensive — which is useful information. The best that happens is they pay without blinking, and you learn your comfort zone was wildly wrong.
Step 3: Sell at that price to ten people. Not to a survey. Not to a landing page. To ten real people through real conversations. Watch their reaction. Listen to their objections.
If seven or more buy without price objection, your price is right — or possibly too low. Test higher.
If three to six buy with some price discussion, your price is in the right range. The objections tell you what value justification your marketing needs.
If fewer than three buy and most cite price, you are either above the market or your value communication is weak. Revisit your offer document before lowering the price — the problem might be messaging, not the number.
Three-Tier Pricing
Once you have a viable price point, add tiers. Three tiers is the standard. Each tier serves a different purpose.
Tier 1 (Low): The Anchor. This is the cheapest option. It exists to make Tier 2 look like good value. It should be stripped-down — useful but clearly limited. Some customers will buy it, and that is fine. But its primary purpose is comparison.
Tier 2 (Medium): The Target. This is the tier you want most people to buy. It includes the full value of your product. Price it at 2-3x the low tier.
Tier 3 (High): The Premium. This is for customers who want everything. Personal support, extra features, faster delivery, whatever your premium experience looks like. Price it at 2-3x the medium tier.
The psychology: when faced with three options, most people choose the middle. One option forces a yes/no decision. Three options shift the question from “should I buy?” to “which should I buy?”
At Vulpine Creations, we offered products at three tiers where applicable. The vast majority of sales were in the middle tier. The premium tier was chosen by about 15% of buyers — and those 15% contributed disproportionately to revenue and margin.
Pricing for Services vs. Products
Service pricing: Charge by the outcome, not by the hour. “I will redesign your website — EUR 3,000” is better than “I charge EUR 75/hour.” Hourly pricing punishes efficiency and creates adversarial incentives — the client wants fewer hours, you need more hours to earn.
If you must charge hourly (some industries require it), set your rate at 3x what you would pay yourself as a salary. A salary of EUR 60,000/year is roughly EUR 30/hour. Your consulting rate should be EUR 90-100/hour. The multiplier covers: unbillable time (admin, marketing, sales), business expenses, and the fact that freelancers do not get paid vacation.
Product pricing: Use value-based pricing (price against the customer’s alternative) with tiered options. Test price sensitivity through split tests once you have enough traffic.
Subscription pricing: Price monthly but offer an annual option at a discount (typically 20%). Annual pricing improves cash flow and reduces churn. The customer who pays annually is committed for twelve months rather than reconsidering every thirty days.
The Price-Quality Signal
Price communicates quality. Whether you like it or not, your price tells customers something about your product before they use it.
A EUR 9 online course says “this is probably low quality or very short.” A EUR 97 online course says “this is substantial and professional.” A EUR 497 online course says “this includes personal attention or premium content.”
These perceptions might not match reality. But they affect purchasing decisions. Customers who pay more expect more, engage more, and — critically — value their purchase more. A customer who pays EUR 97 for a course is more likely to complete it than one who pays EUR 9, because the investment creates commitment.
At Vulpine, our premium pricing was a signal to professional performers: “This is not a toy. This is a professional tool.” That signal attracted the right customers and repelled the wrong ones. Both effects were positive.
When to Raise Prices
Raise your price when:
- Your product has improved significantly since the last pricing change
- Customer feedback consistently praises value without mentioning price
- Your unit economics show thin margins despite growing revenue
- You have a waiting list or more demand than you can serve
- Competitors with inferior products charge more
How to raise: Grandfather existing customers at their current rate. Apply new pricing to new customers only. This avoids the pain of existing customers feeling punished.
Announce the increase in advance: “Starting [date], our price will be EUR [new price]. Current customers keep their current rate.” This creates urgency for prospects on the fence and rewards early adopters.
The Foundational Truth
Your price is not a number. It is a statement about who your product is for and what it is worth.
Price too low, and you attract customers who do not value what you offer. Price too high, and you exclude people who need your help. Price right, and you create a sustainable business that serves the right people at a margin that allows you to keep improving.
Start high. Test honestly. Adjust based on data. Trust that the right price is almost certainly higher than the price that feels comfortable.
Your product is worth more than you think. Revenue at healthy margins is the foundation of every business that lasts.
Price accordingly.
