Growth pricing is when pricing changes based on a company’s stage of growth, customer adoption, or market conditions. Instead of being fixed, the price adjusts as demand, value perception, or customer needs shift. A business could start with lower prices to attract early users (penetration pricing), scale prices as a product gains traction (value-based pricing), or use tiered models to increase revenue as it gains more customers. The pricing should support specific growth goals, such as user acquisition, retention, and maximising revenue per customer.

Below, we’ll explain how growth pricing works, the advantages and challenges to consider, and how Stripe helps businesses implement growth pricing.

What’s in this article?

• How does growth pricing work?
  
• What are the big advantages of growth pricing?
  
• What challenges come with growth pricing?
  
• How does Stripe help businesses implement growth pricing?
  

How does growth pricing work?

Growth pricing adapts a company’s pricing model to different stages of its growth. Instead of remaining static, the price changes based on customer adoption, product maturity, and market conditions.

Early 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 launch with beta pricing or limited-time free tiers. The goal is to minimise barriers to entry and build a user base quickly.

Early pricing models might include the following:

• Freemium: A free tier with limited features

• Trial-based: A full-featured product that’s free for a set time

• Discounted early access: Lower pricing for early adopters

• Pay-as-you-go: A no-commitment pricing structure in which customers pay only for what they use

Scaling phase

As demand increases and product-market fit strengthens, prices adjust to reflect value. For example, a subscription platform might introduce premium tiers as users become more engaged. This middle layer is where a lot of revenue growth happens. Companies carefully design their pricing to ensure there’s always a natural next step for customers as they become more invested in the product.

These are the most common pricing models at this point:

• Seat-based pricing: This means charging per user, which works best when the product spreads within teams.

• Usage-based pricing: This involves charging based on volume, which is good for products where spending naturally increases as usage scales.

• Feature-based tiers: This model involves charging more for advanced capabilities, keeping the base product accessible while monetising heavy users.

• Hybrid models: These combine multiple elements. For example, a business might charge per user while offering feature-based plans with extra capabilities.

Mature stage

Once businesses have scaled past individual users or small teams, they introduce pricing that’s fine-tuned for profitability and higher customer lifetime value (LTV) rather than just acquisition. For example, a marketplace might introduce annual commitments or loyalty pricing or expand add-ons. This layer focuses on maximising revenue per account while keeping the entry-level and flexible pricing intact.

The pricing at this level often includes these models:

• Enterprise pricing: Custom contracts with bulk discounts, premium support, and advanced security features

• Commitment-based discounts: Lower pricing for annual contracts vs. monthly ones

• Add-ons and extensions: Selling additional capabilities, such as advanced reporting, application programming interface (API) access, and integrations

What are the big advantages of growth pricing?

Growth pricing scales naturally with your customers, allowing you to charge more as you expand. Companies use it to balance easy adoption with long-term revenue expansion. When it’s done correctly, growth pricing can create a major competitive advantage. Here’s how.

It lowers barriers to entry without capping revenue

If you price too high upfront, you could scare off potential customers. If you price too low, you miss out on potential revenue. Growth pricing solves this problem by letting customers start small while creating clear upgrade paths as they get more value.

This is why many SaaS companies use freemium models. Notion, for example, offers a free tier for individuals, but a paid plan for teams.

It connects revenue to customer success

With the best growth pricing models, customers pay more only when they get more. For example, with usage-based pricing, small startups might pay very little at first. But when they scale, their costs increase in a way that reflects their success.

With a flat-rate model, customers might leave when they feel they’re overpaying relative to their usage. Growth pricing eliminates this issue by linking cost to the value received.

It lets you serve a range of user types

LTV will vary based on the user. Some will always stick to the basics, while others will happily pay for premium features, more seats, or enterprise perks. Growth pricing ensures you’re not missing out on money from your biggest fans while you focus on keeping your entry-level customers happy.

Take Canva as an example. Casual users don’t have to pay, but businesses and pros pay for features such as collaboration tools, premium content, and AI-powered design help. The free plan doesn’t limit growth, and the upsells capture serious users.

It gives you flexibility to experiment

Growth pricing lets you test and improve without overhauling your entire model. You can experiment with upsells, tweak tier structures, or introduce new pricing layers without disrupting your core product.

This is why many successful companies keep refining their premium offerings. Spotify, for instance, started with a simple free vs. paid model but now offers family plans, student discounts, and premium add-ons such as audiobooks. Instead of guessing the single “perfect” price that will appeal to every customer, it adjusts pricing based on what customers want.

It protects against competitors

If your pricing is too rigid, a competitor can undercut you and steal customers. Growth pricing makes that harder by tying price to customer usage, adoption, or feature needs. Users are less likely to leave if they feel that they’re getting their money’s worth.

What challenges come with growth pricing?

Growth pricing sounds great in theory: charge less upfront, let customers scale into higher prices, and everyone wins. But in practice, it comes with challenges that can surprise businesses. Here are some of the biggest obstacles to watch for.

Finding the right starting price

Start too low and you might gain a lot of low-value customers who never upgrade. Start too high and you could scare off the people you need for growth. Freemium models are a perfect example of this problem: companies often assume free users will naturally convert to paid ones, but in reality, only 5% of freemium users convert for the average startup. Companies that use freemium models should ensure they’re giving users a good reason to upgrade.

Designing a useful entry-level tier

Nobody likes realising that a service they thought was cheap or free is useless unless they pay for an upgrade. If your pricing model feels like a bait and switch, customers might feel cheated. Ensure your free or entry-level offering feels useful so that upgrading is a natural progression.

Managing expansion pricing

Seat-based, usage-based, and tiered pricing are more complicated to manage. If customers are confused about what they’re paying for, the risk of billing disputes and additional support work increases. These pricing models work best when customers understand how they’re being charged.

Keeping pace with competitors

If you scale pricing too aggressively, competitors might take the opportunity to offer a simpler, cheaper alternative. For example, an enterprise software company that charges per-seat fees might struggle to compete with companies that offer more predictable flat-rate or team-based pricing. Suddenly, the enterprise company’s tool looks overpriced. The business will need to adjust pricing to stay competitive.

Demonstrating the value of upgrades

Customers don’t mind paying more if they’re getting more value, but if the price rises without a clear benefit, they might feel like they’re being treated unfairly. For instance, if a cloud storage provider charges based on usage but increases the per-unit price for usage above a certain threshold, customers might feel that their costs are growing faster than expected. Growth pricing works best when it’s easy for customers to understand how costs will increase and why it’s worth paying more.

Calculating the prices you need

Growth pricing often means starting with lower prices and betting on future upgrades. But if upgrades happen too slowly – or conversion rates aren’t as high as expected – you end up with a big user base that isn’t generating enough revenue. If pricing isn’t structured well, you might scale in users but not in revenue. This can lead to funding crunches, layoffs, and short-sighted pricing overhauls.

How does Stripe help businesses implement growth pricing?

Stripe gives businesses the tools to build flexible, automated pricing models that develop with customer adoption. Instead of asking companies to lock into rigid subscription plans or one-off payments, Stripe makes it easy to set up dynamic billing structures, experiment with pricing, and refine revenue expansion. Here’s how it works.

Billing support for different models

Stripe Billing lets businesses set up a wide range of pricing structures without heavy engineering work. Whether a company wants to charge per user, per transaction, per API call, or through tiered plans, Stripe makes it easy to configure and automate. Instead of manually tracking usage and issuing invoices, you can let Stripe calculate costs in real time, send invoices, and handle automatic payments.

Automated expansion revenue and upsells

One of the biggest challenges with growth pricing is expansion revenue – getting customers to upgrade naturally as they receive more value. Stripe provides the following tools to help:

• Adaptive subscriptions: These allow businesses to upgrade customers mid-cycle or apply pro-rata charges when they switch plans.

• Customer self-service: This lets customers self-upgrade or manage their plans without needing to interact with sales or support.

Flexible pricing experimentation

One of the biggest advantages Stripe offers businesses is the ability to test and improve pricing without engineering overhauls. With Stripe, businesses can do the following:

• Do A/B tests on different pricing models: Companies can run experiments on different pricing structures and see what converts best.

• Offer discounts and promotional pricing: Businesses can introduce limited-time offers or personalised discounts without changing their core pricing setups.

• Easily expand to new markets: Stripe supports more than 135 currencies, making it easy to adjust pricing for different regions or introduce localised pricing tactics.

Instead of making permanent, risky pricing changes, businesses can tweak and test over time and learn what works without disrupting revenue.

Enterprise-level tools

As companies scale, their pricing tends to get more complex with annual contracts, custom enterprise deals, and multilayered billing. Stripe helps with the following:

• Custom pricing and invoicing: Sales teams can create and manage custom deals for enterprise clients.

• Multi-team billing: Businesses can bill different departments separately while accumulating revenue under one account.

• Automated tax compliance: Growth pricing gets complicated when you handle taxes across different regions, but Stripe automatically calculates and applies tax rates worldwide.

For example, a company that starts with self-serve subscriptions can later introduce enterprise plans with custom contracts, all within Stripe’s infrastructure and without having to rebuild its billing system.

Minimised churn and revenue leakage

Growth pricing models rely on predictable expansion revenue, but that doesn’t work if customers leave due to failed payments or an inability to complete the renewal process. Stripe helps reduce churn with these features:

• Smart payment retries: Stripe uses AI to retry failed transactions at the best possible times.

• Built-in fraud prevention: Stripe helps prevent chargebacks and unauthorised transactions so companies don’t lose revenue.

• Quick checkout and payment flexibility: Stripe supports one-click checkout and local payment methods to minimise payment friction.

By letting Stripe automate much of this work, businesses can avoid losing revenue from preventable churn.