A growth-based pricing strategy involves adjusting prices based on a company’s stage of development, customer adoption, or market conditions. Rather than being fixed, the price adjusts as demand, perceptions of value, or customer needs change. A company can start with lower prices to attract early adopters (penetration pricing), scale prices as a product gains traction (value-based pricing), or use tiered models to increase revenue as it gains more customers. Prices should support specific growth objectives, such as user acquisition and retention and maximizing revenue per customer.
Below, we’ll explain how a growth-based pricing strategy works, its advantages and disadvantages, and how Stripe helps businesses implement it.
What does this article contain?
Table of Contents
- How does a growth-based pricing strategy work?
- What are the main advantages of a growth-based pricing strategy?
- What are the challenges of a growth-based pricing strategy?
- How does Stripe help businesses implement a growth-driven pricing
- strategy?
How does a growth-based pricing strategy work?
A growth-based pricing strategy adapts a company’s pricing model to the different stages of its growth. Rather than remaining static, the price varies based on customer adoption, product maturity, and market conditions.
Initial stage
Companies start with lower prices, freemium models, or aggressive discounts to attract early adopters. For example, a software-as-a-service (SaaS) startup might start with beta pricing or free plans for a limited time. The goal is to minimize barriers to entry and build a user base quickly.
Initial pricing models may include the following:
- Freemium: a free tier with limited features
- Based on free trials: a full-featured product that is free for a limited time
- Discounted Early Access: Lower prices for early adopters
- Pay-as-you-go: A no-commitment pricing structure where customers pay only for what they use
Scaling growth phase
As demand increases and product-market fit solidifies, prices adjust to reflect value. For example, a subscription platform might add premium plans as users become more engaged. This middle layer is where much of the revenue growth occurs . Companies carefully design their pricing so there’s always a natural next step for customers as they become more engaged with the product.
These are the most common pricing models right now:
- Per-user pricing: This means charging per user, which works best when the product scales across teams.
- Consumption-based pricing: This involves charging based on volume , which is good for products where spending naturally increases as usage increases.
- Feature-based tiers: This model involves charging more for advanced features, keeping the basic product affordable while monetizing heavy users.
- Hybrid models: These combine multiple elements. For example, a company may charge per user and offer feature-based plans with additional functionality.
Maturity stage
Once companies have moved beyond the individual user or small team stage, they introduce a tailored pricing structure to maximize profitability and customer lifetime value (LTV), rather than focusing solely on acquisition. For example, a marketplace might incorporate annual commitments, loyalty pricing, or extend add-ons. This phase focuses on maximizing revenue per account while maintaining entry-level pricing and flexible options.
Prices at this level often include these models:
- Business pricing: Customized contracts with volume discounts, premium support, and advanced security features
- Commitment discounts: lower prices for annual contracts compared to monthly ones
- Add-ons and extensions: Sell additional functionality, such as advanced reporting, application programming interface (API) access, and integrations
What are the main advantages of a growth-based pricing strategy?
Growth-based pricing scales naturally with your customers, allowing you to charge more as you grow . Companies use it to balance ease of adoption with long-term revenue expansion. When implemented correctly, growth-based pricing can become a significant competitive advantage. Here’s how to do it.
Reduce barriers to entry without limiting income
If you set your price too high from the start, you could scare away potential customers. If you set your price too low, you’ll be losing potential revenue. Growth-based pricing solves this problem by allowing customers to start small and offering them clear upgrade options as they perceive more value.
This is why many SaaS companies use. Notion, for 
Link revenue to customer success
example, offers a free plan for individual users and a paid plan for teams.
With the best growth-based pricing models, customers only pay more when they receive more. For example, with usage-based pricing, small st
artups may pay very little at first. But as they grow, their costs increase in a way that reflects their success.
With a fixed-rate model, customers can opt out if they feel they’re overpaying for their usage. Growth-based pricing eliminates this problem by linking costs to the value received.
It allows you to serve different types of users
The LTV will vary depending on the user. Some will always stick with the basics, while others will be happy to pay for premium features, more users, or business benefits. A growth-based pricing strategy ensures you don’t lose revenue from your most loyal customers while still taking care of those on entry-level plans.
Take care , for example. Casual users don’t have to pay, but businesses and professionals pay for features like collaboration tools, premium content, and AI-powered design assistance. The free plan doesn’t limit growth, and upsells attract the most engaged users.
It gives you flexibility to experiment
A growth-based pricing strategy allows you to test and improve without having to completely redesign your entire model. You can experiment with upsells, modify tier structures, or introduce new pricing tiers without affecting your core product.
That’s why many successful companies continue to refine their premium offerings. Spotify, for example, started with a basic model of a free and paid plan, but now offers family plans, student discounts, and premium add-ons like audiobooks. Instead of trying to hit a single “perfect price” that appeals to all customers, adjust prices based on what customers really want.
Protects against competitors
If your prices are too rigid, a competitor can offer something cheaper and steal your customers. A growth-based pricing strategy makes that difficult by linking the price to customer consumption, adoption, or feature needs. Users are less likely to leave if they feel they’re getting a good return on their money.
What are the challenges of a growth-based pricing strategy?
A growth-based pricing strategy sounds great in theory: charge less upfront, allow customers to upgrade to higher plans, and everyone wins. However, in practice, it comes with challenges that can surprise businesses. Here are some of the biggest obstacles to consider.
Finding the right starting price
If you start with prices that are too low, you could attract many low-value customers who never upgrade. If you start too high, you could scare away the people you need to grow. Freemium models are a perfect example of this problem: companies often assume that free users will naturally convert to paying users, but in reality, only 5% of freemium users convert to paying users for the average startup. Companies that use freemium models must make sure they offer users a good reason to upgrade to a paid plan.
Designing a useful entry level
No one likes to realize that a service that seemed cheap or free is useless unless they pay for an upgrade. If your pricing model seems like a scam, customers could feel ripped off. Make sure your free or basic offering is useful so that upgrading feels natural.
Manage expansion prices
User-based, usage -based , and tiered pricing are more complicated to manage. If customers aren’t clear about what they’re paying, the risk of billing disputes and additional customer service work increases. These pricing models work best when customers understand how they’re being charged.
Keeping up with competitors
If you scale prices too aggressively, competitors might seize the opportunity to offer a simpler, cheaper alternative. For example, an enterprise software company that charges per user might struggle to compete with companies that offer more predictable pricing, such as flat rates or per-team pricing. Suddenly, the company’s tool seems too expensive. The company will have to adjust prices to remain competitive.
Demonstrate the value of improvements
Customers don’t mind paying more if they get more value, but if the price increases without a clear benefit, they may feel they’re being treated unfairly. For example, if a cloud storage provider charges based on usage but increases the price per unit when a certain threshold is exceeded, customers might feel their costs are rising faster than expected. A growth-based pricing strategy works best when customers easily understand how and why the cost will increase, and why it’s worth paying more.
Calculate the prices you need
A growth-based pricing strategy typically involves starting with lower prices and banking on future improvements. But if updates are implemented too slowly (or conversion rates aren’t as high as expected), you end up with a large user base that doesn’t generate enough revenue. If pricing isn’t structured well, you may increase the number of users but not the revenue. This can lead to funding issues, layoffs, and hasty changes in pricing strategy.
How does Stripe help businesses implement a growth-driven pricing strategy?
Stripe gives businesses the tools to create flexible, automated pricing models that evolve with customer adoption. Instead of asking businesses to set rigid subscription plans or one-time payments, Stripe makes it easy to set up dynamic billing structures, experiment with pricing, and fine-tune revenue expansion. Here’s how it works.
Billing support for different models
Stripe Billing allows businesses to set a wide range of pricing structures without extensive engineering. Whether a company wants to charge per user, per transaction, per API call, or through tiered plans, Stripe makes it easy to set up and automate. Instead of manually tracking usage and issuing invoices, you can let Stripe calculate costs in real time, send invoices, and manage automatic payments.
Expansion revenue and automated upsells
One of the biggest challenges with a growth-driven pricing strategy is incremental revenue: getting customers to upgrade to higher plans naturally as they receive more value. Stripe offers the following tools to help you:
- Adaptive Subscriptions: Allow businesses to upgrade customers’ plans mid-cycle or apply prorated charges when they change plans.
- Customer Self-Service: Allows customers to upgrade or manage their plan themselves without having to contact sales or support.
Experimenting with flexible pricing
One of the biggest advantages Stripe offers businesses is the ability to test and improve pricing without the need for engineering reviews. With Stripe, businesses can do the following:
- A/B test different pricing models: Businesses can test different pricing structures and see which one generates the best conversions.
- Offer discounts and promotional prices: Businesses can offer limited-time offers or customized discounts without changing their core pricing settings.
- Easily expand into new markets: Stripe supports over 135 currencies , making it easy to adjust prices by region or implement localized pricing strategies.
Instead of making permanent and risky price changes, companies can adjust and test over time, learning what works without impacting revenue.
Enterprise-grade tools
As businesses grow, their pricing tends to become more complex with annual contracts, customized enterprise agreements, and multi-tiered billing. Stripe helps you with the following:
- Custom pricing and billing: Sales teams can create and manage custom deals for enterprise customers.
- Multi-team billing: Businesses can bill different departments separately while accumulating revenue in a single account.
- Automated tax compliance: Growth-based pricing strategies get complicated when you have to manage taxes across different regions, but Stripe automatically calculates and applies tax rates worldwide.
For example, a business starting with self-managed subscriptions can later add enterprise plans with customized contracts, all within Stripe’s infrastructure and without having to rebuild its billing system.
Minimizing customer and revenue loss
Growth-based pricing models rely on predictable revenue expansion, but that doesn’t work if customers leave due to payment failures or an inability to complete the renewal process. Stripe helps reduce customer churn with these features:
- Smart Payment Retries: Stripe uses AI to retry failed transactions at the best possible time.
- Built-in fraud prevention: Stripe helps prevent chargebacks and unauthorized transactions so businesses don’t lose revenue.
- Fast checkout and flexible payment options: Stripe supports one-click checkout and local payment methods to minimize payment friction.
By letting Stripe automate much of this work, businesses can avoid lost revenue from avoidable cancellations.
The content of this article is for general informational and educational purposes only and should not be construed as legal or tax advice. Stripe does not guarantee the accuracy, completeness, adequacy, or currency of the information contained in this article. If you need assistance with your specific situation, we recommend consulting with a competent attorney or accountant licensed to practice in your jurisdiction.
