Anchor pricing is a strategy where you establish a price point that customers can reference when making decisions. For a new product, the first price a customer sees becomes an “anchor,” influencing their perception of value and framing their subsequent choices.

Setting this initial price is a critical step, especially for early-stage software products. It’s not just about revenue; it’s about communicating your product’s value and positioning it in the market. The challenge is setting a price that attracts early adopters without permanently locking you into a model that may not work as your product and customer base mature.

For a software product, anchoring isn’t about a single sticker price. It’s about creating a flexible pricing structure that you can test and iterate on. This involves setting initial plans and prices that serve as a baseline for gathering feedback and usage data.

Here are a few common techniques for setting early-stage prices that allow for future flexibility:

• Beta or introductory pricing: Offer a time-limited discount to early adopters. This explicitly signals that the price will change, setting an expectation of a future price increase while rewarding the first users.
• Good, better, best tiers: Present multiple options (e.g., Free, Pro, Enterprise). The lower tiers act as an anchor, making the higher-priced, feature-rich tiers seem more valuable by comparison. This also allows you to test which features customers are willing to pay more for.
• Usage-based models: Instead of a flat fee, tie pricing to a specific metric like API calls, data storage, or active users. This model inherently scales and can be adjusted by changing the price per unit.

The goal is to build a pricing framework, not a rigid price. By using these methods, you anchor the value of your product while giving yourself room to adjust the numbers as you learn more about your customers.

An adaptable pricing strategy is crucial for sustainable growth. In the early days of a product, you’re operating with limited information. You have hypotheses about your ideal customer, the most valuable features, and what the market is willing to pay, but you need real-world data to validate them.

A flexible approach allows you to:

• Iterate based on data: As you learn how customers use your product, you can adjust your pricing to better align with the value they receive. You might discover that a feature you considered minor is a major driver of upgrades.
• Adapt to market changes: The competitive landscape can shift quickly. A flexible model lets you respond to new entrants or changes in customer expectations without a massive engineering overhaul.
• Optimize for revenue: What works for your first 100 customers might not work for your next 1,000. The ability to test different price points and models is essential for maximizing lifetime value and revenue.
• Support product evolution: Your product will evolve. New features will be added, and others may be bundled differently. Your pricing needs to be able to evolve in lockstep with your product roadmap.

Committing to a rigid pricing model too early is one of the most common pitfalls for new products. It can stifle growth, frustrate early customers when changes are eventually forced, and leave potential revenue on the table.

While flexibility is key, changing prices—especially for existing customers—is delicate. The biggest challenge is managing the expectations of your early adopters who signed up at a lower price point.

Here are some common challenges and how to think about them:

• Grandfathering early customers: This is the practice of allowing existing customers to keep their original price plan indefinitely, or for a set period. It’s a great way to reward loyalty but can create complexity. You end up maintaining multiple legacy plans, which can be a technical and administrative burden.
• Communicating price changes: When you do need to raise prices for existing users, communication is everything. You need to clearly articulate the “why” behind the change, focusing on the added value, new features, and improved service they will receive.
• Technical implementation: Your billing system needs to support multiple plans, versioning, and the ability to migrate users from one plan to another. A rigid, homegrown system can make pricing changes a significant engineering project.

The best way to mitigate these challenges is to plan for them from the start. Choose a billing infrastructure that is built for flexibility and establish a clear policy on how you’ll handle price changes before you need to make them.

Setting adaptable pricing from day one requires a billing system designed for iteration. Kinde’s billing infrastructure provides the foundational tools to create and manage pricing models without locking you into a single approach.

Instead of hardcoding prices into your application, Kinde allows you to define plans, features, and pricing models that can be updated and versioned over time.

This approach lets you implement flexible strategies easily:

• Multiple pricing models: Kinde supports various pricing models, including flat-rate subscriptions (fixed charges) and usage-based billing (metered or tiered). You can combine these to create hybrid plans that align price with value from the start.
• Plan and feature management: You can create different plans (e.g., Free, Pro, Business) and control which features are available in each. As your product evolves, you can add new features or move existing ones between plans without major code changes.
• Reacting to changes: Using webhooks, your application can automatically respond to events like plan upgrades or downgrades (customer.plan_changed). This enables you to provision or de-provision features in real-time as customers move between your anchored price points.

By using a dedicated billing platform, you separate your pricing logic from your core product code. This gives you the freedom to experiment with your pricing strategy and adapt to customer feedback, ensuring your initial price anchor is a starting point for growth, not a limitation.

• Pricing models
• About plans
• Respond to customer activity using webhooks