The most common pricing mistake we see is the founder who calculates their costs, adds a margin, and calls it a price. Cost-plus pricing is a floor. It tells you the minimum you can charge without losing money. It says nothing about the maximum, which is where the real pricing decision lives.
Why does cost-plus pricing leave money on the table?
Because your costs have nothing to do with the customer's value. Your product might cost fifty dollars per month to serve a customer. But if it saves that customer ten thousand dollars per month in labor, the value gap is nine thousand nine hundred fifty dollars. Cost-plus pricing captures fifty dollars plus a margin. Value-based pricing captures a share of the nine thousand nine hundred fifty.
The founder who charges one hundred dollars per month because their costs are fifty is leaving ninety-nine percent of the value on the table. The customer would happily pay two thousand because they are still saving eight thousand. But the founder never asked, because they were anchored to their costs instead of the customer's value.
This is not theoretical. We have worked with companies that tripled their prices and lost zero customers. The product was the same. The value was the same. The only thing that changed was the founder's willingness to charge for the value they were already creating.
How do you quantify the value you create?
Ask your customers. Not a survey. A conversation. "What was this problem costing you before you started using our product?" The answer comes in three forms.
Time saved. How many hours per week does your product eliminate? Multiply by the fully loaded hourly cost of the person doing the work. If your product saves an operations manager ten hours per week and their fully loaded cost is seventy-five dollars per hour, the value is three thousand per month.
Revenue gained. Does your product help the customer close more deals, retain more customers, or expand more accounts? Quantify the incremental revenue. If your product helps a sales team close two additional deals per quarter at an average deal size of fifteen thousand, the value is ten thousand per month.
Costs avoided. Does your product replace a tool, a contractor, or a headcount? The avoided cost is the value. If your product replaces a five-thousand-dollar-per-month agency, the value is five thousand per month.
Add these up. That is the total value. Charge ten to thirty percent of it. The customer keeps the rest. Both sides win.
What is the three-tier structure?
Three tiers give the customer a choice between yes and yes instead of yes and no. The structure matters more than the specific prices.
The low tier captures small teams and price-sensitive buyers. It should have enough features to be useful but not enough to be comfortable. This tier exists to get people in the door. Expect ten to twenty percent of customers to choose it.
The middle tier is your real price. It has everything the low tier has plus the features that most customers need. This is the tier you design for. Expect sixty to seventy percent of customers to choose it. The price should be ten to thirty percent of the value you create for your typical customer.
The high tier is for enterprises and power users. It includes everything plus premium support, custom integrations, and dedicated success. The price should be two to three times the middle tier. It exists partly for revenue and partly to anchor the middle tier as reasonable.
The mistake is pricing all three tiers too close together. If the low tier is one hundred, the middle is one twenty, and the high is one fifty, there is no differentiation. Spread them: one hundred, three hundred, seven hundred. The spread creates perceived value at each level.
How do you have the pricing conversation?
The pricing conversation starts in discovery, not at the proposal stage. During the discovery call, ask: "What is this problem costing you today?" The answer gives you the anchor for your pricing.
When you present the price, present it against the cost of the problem, not against the cost of your product. "You told me this problem costs you eight thousand a month in lost productivity. Our solution is two thousand a month. That is a four-to-one return." The framing makes the price feel small because it is relative to the problem, not to your costs.
If the prospect pushes back, do not discount immediately. Ask what they were expecting. The answer tells you whether the issue is budget (they cannot afford it) or value (they do not believe it is worth it). Budget issues can be solved with payment terms. Value issues require more discovery, not a lower price.
Frequently asked questions
How do you price a B2B SaaS product?
Start with the value you create, not the cost you incur. Quantify the value: hours saved, revenue gained, costs avoided. Charge ten to thirty percent of that value. If the customer saves ten thousand a month, charge one to three thousand. The customer keeps the rest.
When should you raise prices?
Every six months for new customers. Grandfather existing customers at their current rate. If nobody pushes back on the new price, you raised it by too little. If more than twenty percent of prospects walk, you raised it too much.
Should you offer discounts?
Only in exchange for something: an annual prepayment, a case study, a referral, or a multi-year commitment. A discount without a trade teaches the customer that your price is negotiable. A discount with a trade is a business deal.
How many pricing tiers should you have?
Three. A low tier for small teams that captures the long tail. A middle tier that most customers choose and that represents your target price. A high tier for enterprises that anchors the middle tier as reasonable. One price is a take-it-or-leave-it proposition. Three prices give the customer a choice between yes and yes.
How do you know if your price is too low?
Three signals: nobody ever pushes back on price, your close rate is above sixty percent, and customers never negotiate. Any one of these means you are leaving money on the table. The right price has some friction.