How to Optimize Your Pricing Model for PLG Success

Author

Filippo Ferri
October 15, 2024

👋 Welcome to Inspired Momentum!

Pricing is one of the most powerful levers in Product-Led Growth (PLG), but many companies struggle to find the right balance.

❌ Charge too much upfront, and users won’t adopt the product.
❌ Give too much away for free, and upgrades suffer.

So, how do you design a pricing strategy that drives growth without killing revenue?

In this issue, we’ll cover:

  1. The most common pricing mistakes PLG companies make.

  2. How to choose the right pricing model for your product.

  3. Real-world examples of high-performing PLG pricing strategies.

Let’s dive in! 🚀

🚨 The 3 Biggest PLG Pricing Mistakes

  1. Pricing Is Too Confusing

    • If users don’t understand your pricing, they won’t convert.

    • Complex plans and hidden fees create friction.

    💡 Fix:

    • ✅ Keep pricing simple and transparent.

    • ✅ Offer a clear side-by-side comparison of plans.

    📌 Example:

    • Notion simplified pricing by offering just four tiers: Free, Plus, Business, and Enterprise.

  2. Free Plan Gives Away Too Much

    • If free users get everything they need, there’s no reason to upgrade.

    • PLG works best when free tiers offer value but create natural upgrade moments.

    💡 Fix:

    • ✅ Identify the “paywall trigger”—what premium feature drives upgrades?

    • ✅ Limit features that scale (storage, seats, integrations, automation).

    📌 Example:

    • Slack limits message history on free plans, nudging teams to upgrade.

  3. No Clear Upgrade Path

    • Users need a compelling reason to move to a paid plan.

    • If they can’t see why upgrading is better, they won’t do it.

    💡 Fix:

    • ✅ Highlight the business impact of upgrading.

    • ✅ Use in-app prompts and email nudges to encourage conversions.

    📌 Example:

    • Figma reminds free users they need Pro features when collaborating at scale.

💡 How to Choose the Right PLG Pricing Model

  1. 🔹 Freemium (Best for Viral Growth & Low CAC)

    • ✅ Works well when free users drive word-of-mouth adoption.

    • ✅ Encourages bottom-up growth (users → teams → companies).

    • ❌ Needs strong upgrade incentives to convert free users.

    💡 Example: Zoom’s 40-minute call limit forces teams to upgrade.

  2. 🔹 Free Trial (Best for High-Touch Sales & PLG Hybrid Models)

    • ✅ Works well for B2B SaaS products that need deeper evaluation.

    • ✅ Removes friction for paid adoption by showing full value first.

    • ❌ Requires a strong activation strategy to hook users fast.

    💡 Example: Calendly’s 14-day trial lets users experience automation before requiring payment.

  3. 🔹 Usage-Based Pricing (Best for Flexible, Scalable Adoption)

    • ✅ Aligns cost with value received.

    • ✅ Works well for infrastructure, API, and data-heavy products.

    • ❌ Harder to predict revenue upfront.

    💡 Example: Stripe charges based on transaction volume, so businesses only pay for what they use.

  4. 🔹 Hybrid (Best for Balancing Self-Serve & Sales)

    • ✅ Combines free access + trials + scalable pricing.

    • ✅ Great for B2B SaaS that serves multiple customer types.

    • ❌ Can be complex to implement.

    💡 Example: HubSpot offers freemium, trials, and tiered pricing, capturing both SMBs and enterprises.

 Case Study: How Notion Scaled Pricing Effectively

🔹 The Challenge: Needed to monetize without killing viral growth.

🔹 The Fix:

  • ✅ Freemium model for individuals, driving word-of-mouth adoption.

  • ✅ Paywall at the team level, ensuring businesses pay for collaboration.

  • ✅ Usage-based limits (guest invites, storage) to push organic upgrades.

🎯 The Result?

  • Massive free user adoption → Seamless enterprise expansion.

🚀 Your Takeaway: Find your product’s natural upgrade moment and price around it.

💡 Quick Wins to Optimize Your Pricing Today

  • ✅ Audit your free plan: Is it too generous or too restrictive?

  • ✅ Identify your “paywall moment”: What feature drives the most conversions?

  • ✅ A/B test pricing pages: Do users respond better to tiers, trials, or usage-based models?

  • ✅ Use AI & analytics: Track pricing friction points in Mixpanel, Amplitude, or Hotjar.

📣 Let’s Talk!

What’s the best PLG pricing strategy you’ve seen? Reply to this email—I’d love to feature your insights in a future issue!

Until next time,
Filippo

P.S. Know someone rethinking their pricing strategy? Share this issue with them! 🚀

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