How to Price Your Product
Without Leaving Money on the Table

Naomi Ionita

Partner, Menlo Ventures
Ex-VP Growth, Invoice2go · Ex-Evernote

JAN 12 2023

Core Concept

3 Mistakes Founders Always Make on Pricing

"If guilt is one of the main reasons people pay you, your free version is too good, and you are leaving money on the table."

Evernote charged $45/yr while power users said they got hundreds of dollars of value
True PMF = people opening their wallets, not just using your product
Revisit pricing every 6–12 months, just like your roadmap
Free beta = an R&D cost, not a permanent business model

Framework

Match Price to Value: The Full Pricing Process

Pricing committee: cross-functional, product, data, finance, sales. Own it together.
Feature ranking: 100-point exercise allocates user attention across feature list → reveals true demand
Van Westendorp: 4 survey questions (too cheap / good deal / expensive / prohibitive) map the willingness-to-pay range
Day 1 features = aha moment + habit formation → must be free or in starter plan
Day 100 features = advanced, data-at-scale → lock behind pro; upsell when users hit quota

50%

of pricing changes → 25%+ ARR lift

4×

monetization improvement vs. acquisition impact

The Envoy Story Larry (Envoy CEO) 10X'd his price mid-sales-meeting on a gut feeling. The prospect said "sure", zero hesitation. Lesson: no pushback = still underpriced. Target 20–30% of deals lost on price as a healthy signal you've found the ceiling.

The Invoice2go Result By redesigning plans around day-1 vs. day-100 features, Invoice2go doubled upgrade rate from starter to pro, while also raising the pro plan price by 30%. Both improved simultaneously.

Modern Growth Stack

The New Infrastructure for Product-Led Revenue

A play on the Modern Data Stack, the MGS covers what you do with the data to drive growth. Three core pillars:

1. Data, Break the Silos

Reverse ETL tools (Hightouch, Census) sync warehouse data into every team's daily workflow. Business side self-serves without engineering. Activation signals, churn risk, and upgrade signals flow in real time.

2. Workflow, Cross-Functional Execution

Growth is inherently cross-functional. Purpose-built tools replace months of bespoke engineering. Reclaim those sprints for proprietary product features instead of internal tooling for billing or experimentation.

3. Impact, Hard ROI, Both Ways

Automation saves engineering time (cost reduction). Better segmentation and nudges drive upgrades (revenue lift). A dual ROI story is especially powerful in a tight macro environment.

Key Layers in the Stack

Product-Led Sales (Endgame, Pocus), product usage data surfaces upgradable accounts for inside sales. "Free money when you shine a light on an account nobody was watching."
Experimentation (Eppo, Amplitude), tie A/B test results directly to board metrics (revenue, subscriptions) in your warehouse. No more Excel post-analysis in Jupyter notebooks.
Usage-Based Billing (Orb, Metronome), meter consumption, package hybrid fixed + variable plans, forecast revenue. Seat-based incumbents don't serve the usage-based shift well.
Generative AI, copilots for marketing copy, SDR outreach, ad creative. Attributable ROI on time saved + campaign performance lifts. The most compelling new layer right now.

"A 1% improvement on monetization drives 4× the bottom-line impact of a 1% improvement on acquisition. Yet most teams obsess over acquisition."

Tactics

Running Pricing Experiments That Actually Work

Geo-segment first, test in Canada or Australia before the US rollout. Limits blast radius while generating clean signal on conversion and churn impact.
Track long-term cohorts, a year-one discount reveals its true economics only in year two. Don't declare victory on upgrade rate alone.
Freemium paywall placement, free must cover the full aha moment and habit formation path. Everything tied to day-100 scale belongs behind the paywall.
Keep free users, they collapse CAC by driving organic referrals and shared workflows. Give up short-term revenue, preserve long-term growth loops.
Hybrid billing wins, pure usage-based scares CFO buyers who need predictability. A subscription floor with usage quota + overages satisfies both sides.
Lose some deals on price, 20–30% lost deals is healthy signal you've found the ceiling. If zero deals are lost on price, you are certainly undercharging.

Evernote Lesson When guilt was the #1 conversion reason, the free plan was too good. Bifurcation fixed it: light users got a low tier, avid users got a high tier that matched their actual willingness to pay.

Contrarian

Pricing Myths That Cost Founders Millions

✗ Free users are just freeloaders INSTEAD → ✓ Free users are your CAC engine. Figma gave design away individually and used viral, collaborative workflows to land entire enterprises. The free tier drove the paid tier, don't cut it.

✗ One premium plan keeps it simple INSTEAD → ✓ A single tier is a revenue ceiling. Evernote at $45/yr left power users paying 90% below perceived value. Segment by persona, a new user and a daily power user will never justify the same price.

✗ Go pure usage-based, it's the future INSTEAD → ✓ Pure consumption billing kills budget predictability for CFOs. Fewer than 5% of SaaS companies run pure usage-based. A hybrid, subscription floor plus usage escalator, satisfies buyers and maximises revenue.

✗ Lock in pricing at launch, then focus on product INSTEAD → ✓ Treat pricing like your roadmap, revisit every 6–12 months. Half of companies that do see 25%+ ARR jumps from a single repricing. The most common regret: not doing it sooner.