3 Reasons Startups Use Power Law Pricing

Power Law Pricing is the dominant pricing model used in startups and tech companies

Here are 3 reasons why:

1/ Power Law Pricing captures the maximum value under the demand curve

2/ Power Law Pricing provides approximations of a customer’s willingness to pay

3/ Power Law Pricing presents customers with a coherent set of pricing options

…The graphic above shows why Hubspot is a tech giant. The pricing jumps from $38 to $655 and then to $2,624 which represents a – 1x:17x:68x gradient top to bottom.

So how can you use Power Law Pricing for your product or service?

There’s two key parts of a pricing page: telling (communicating prices) & selling (convincing customers to buy).

A potential client should be able to glance at the pricing and quickly work out what it’ll cost them to hire your product or service. 

Here’s my formula: [Monetization Law Number Four]

1/ Graduate pricing in multiples (e.g. 1X, 2X,4X or $10,$20,$40…)

2/ Have 3 pricing tiers as this allows customer comparison without overwhelm

3/ Use Good – Better – Best style words in explaining the pricing options

That's all folks.

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Thanks to Monetization University for sponsoring. I rely on them to check my research.

Monetization & Out — Gary