Pricing a new product often involves math, psychology, and timing. You’re setting a number that tells customers what kind of product this is and how much they should care—all before they’ve even tried it. Once it’s out in the world, pricing starts shaping your customer base, your brand, your cash flow, and your runway. The stakes are high, and the variables are complex.

Below, you’ll find a practical look at how to think about new product pricing strategies, from launch through iteration.

What’s in this article?

• Why is pricing important when launching a new product?
  
• What are the main pricing strategies for new products?
  
• When should you use penetration pricing for a new product?
  
• When should you use price skimming for a new product?
  
• How does value-based pricing work for new products?
  
• Is cost-plus pricing effective for new products?
  
• How to choose the best pricing strategy for your launch
  
• How to roll out and adjust your pricing after launch
  
• How Stripe can help
  

Why is pricing important when launching a new product?

Price is one of the first things your audience sees about a new product. It immediately communicates value, quality, positioning, and intent. It can answer questions such as, “Is this product for me?” and, “Is this product premium or accessible?”

Pricing can set baseline expectations for:

• Future value: If you raise the price later, customers will compare it to your launch price. If you anchor too low, you might never fully escape that gravity.

• Customer mix: Your early customers inform your support needs, feedback loops, and community norms. A heavily discounted launch might generate volume, but it could also skew your user base toward high-churn or lower customer lifetime value (LTV) cohorts.

• Perceived growth trajectory: Your pricing can influence how legitimate your product looks to customers, especially in B2B. Some buyers expect to pay more if they think your product will still be around in five years.

A price change later on can:

• Affect demand and conversion in real time

• Attract (or repel) different kinds of customers

• Reshape your acquisition cost curve

• Change the conversation around your product

• Shift buyers’ perceived return on investment (ROI)

• Give you margin to reinvest

When pricing for a new product misses the mark, it’s felt across teams: sales has to fight harder, support absorbs more frustration, product gets feedback from the wrong users, and marketing struggles to generate qualified leads. You likely end up making changes from a reactive posture. That’s why it’s so important to set the price strategically from Day 1.

What are the main pricing strategies for new products?

There’s no universal formula for pricing something new. But there are a few common pricing strategies for new products, which companies can combine to reflect market conditions, product maturity, and their business goals.

Let’s explore the common approaches:

• Penetration pricing: Launch with a low price to drive adoption quickly. Once you’ve built a user base or gained attention, raise prices to a more sustainable level. This strategy is about speed and visibility.

• Price skimming: Start high, capture early adopters willing to pay a premium, then gradually lower the price over time to reach more price-sensitive segments. This strategy targets those who care most, move first, and are least sensitive to price.

• Value-based pricing: Set your price according to what the product is worth to the customer, not what it costs you to make. This requires a clear view into the customer’s world—what problem they’re solving, what it’s worth to solve, and what alternatives they have.

• Cost-plus pricing: Add a fixed margin to your production costs. This is easy to calculate and protects your margins.

• Competitive pricing: Set your price based on what competitor companies are charging. You’re signaling, “We’re like X, but with these differences.” Sometimes this strategy is defensive, but other times, it’s a smart shorthand to lower the decision friction for customers already trained by the market.

Each of these pricing strategies comes with trade-offs. They’re each a speculation on how your product will enter the market, who it will resonate with, and what kind of business you’re trying to build. Most companies adapt, blend, and evolve their strategies as the product (and the market) grows.

When should you use penetration pricing for a new product?

Penetration pricing is a volume-first strategy. You launch with a low price (sometimes significantly low) to get attention, attract customers, and move fast.

This strategy works best when:

• You’re in a crowded, price-sensitive market: If your product is entering a category where switching costs are low and alternatives are everywhere (e.g., daily-use apps, ecommerce goods, consumer subscriptions), a low price is one of the fastest ways to get someone to give you a try.

• You need adoption fast: Sometimes growth itself is the strategy. Maybe you need users to create network effects, or you’re trying to learn quickly from usage patterns, or maybe you’re building credibility through numbers. This is common in software-as-a-service (SaaS), marketplaces, and platforms where the product improves with scale.

• You’re betting on long-term LTV: If you have good retention mechanics or if your business model monetizes over time (e.g., with subscriptions, usage-based billing, or premium tiers), then a low entry price can be a smart investment, as you expect to earn it back later through renewals, upsells, or habit formation.

• You want to make a statement to competitors: Launching at a price that undercuts the market can send a message that you’re willing to take risks. If you have the funding or cost structure to sustain it, this can scare off smaller competitors or force more established competitors to defend their territory.

Benefits of penetration pricing

With penetration pricing, you’ll likely see faster sign-ups, lower acquisition costs, and a larger initial user base, as customers tend to talk about great deals. You also can get social proof, traction, and possibly a competitive edge if you move fast enough.

Risks of penetration pricing

Conversely, you might attract price-sensitive customers who won’t stick around with penetration pricing. Raising prices later is tricky: you risk churn, backlash, or both. If your margins are already thin, you’ll need real discipline to make the math work. This strategy only works if your product earns loyalty once people are in. The price can get them in the door, but the product has to make them stay.

When should you use price skimming for a new product?

Price skimming involves starting high. You launch with a premium price, capture the early adopters who are most eager (and willing to pay), and then gradually lower the price to reach broader segments over time. You need to know who wants your product most, how much they’ll likely pay, and when to start opening the gates to the next layer of the market.

This strategy works best when:

• Your product is new, different, or first: Skimming works best when there’s little or no competition. You’re anchoring the product as category-defining and charging accordingly. Examples include enterprise software with novel capabilities or a consumer product that does something no one else has quite achieved.

• You’re targeting early adopters: This strategy lets you prioritize customers who value the product most. They’re less price-sensitive, more engaged, and often more forgiving. Capturing this group early can help you learn fast, build credibility, and refine your roadmap without scaling too quickly.

• Your costs are high: If you’ve invested heavily in research and development (R&D), specialized components, or a long development cycle, a higher price helps cover those expenses up front. Skimming protects your margins early on while you grow into efficiency. This is common in hardware, biotech, and other capital-intensive categories where cost per unit starts high and drops later.

• You’re building a premium brand: A high price can make a product feel high-end, even before anyone uses it. If part of your strategy is owning the premium tier, skimming is one way to set that tone. Luxury goods, design-forward consumer technology, and niche SaaS categories use this to position themselves as best-in-class.

• You plan to drop the price over time: Skimming is built on a staggered rollout. You start at the top of the market and lower the price gradually to bring in more price-sensitive customers. This tiered method lets you maximize revenue across segments without needing to overhaul the product.

Benefits of price skimming

By earning more per customer early on, you can fund growth or extend the runway. Price skimming can create a strong perception of value and give you room to lower prices strategically, rather than reactively. You’re also less likely to attract customers hunting for bargains who churn fast or drive up support costs.

Risks of price skimming

With price skimming, your market will be smaller at the start. Not everyone is willing (or able) to pay a premium. If early adopters don’t bite, you lose time. If you lower the price too soon, you risk frustrating those who already bought in. And if your high price isn’t backed up by the product’s perceived value, it can become a credibility problem.

How does value-based pricing work for new products?

Value-based pricing starts with a different question: what is this worth to the customer? What kind of outcome, relief, or advantage does the user feel they’re getting? With new products, this is often the most strategic way to set pricing. When you’re launching a product that doesn’t have an exact match in the market, you have to build your own context rather than setting your price against the “going rate.” Value-based pricing empowers you to shape how your product is perceived and make sure you’re not leaving money behind.

If you’re solving a painful problem or enabling something your customer couldn’t do before, there’s often a willingness to pay more than you’d get from a cost-based model.

This strategy works best when:

• Your product creates real, measurable ROI: If your product saves time, cuts costs, increases revenue, or reduces risk, the price should reflect a share of that value. For example, a tool that saves a team 20 hours of work per month might reasonably cost hundreds per seat, even if the marginal delivery cost is low.

• You’re bringing something new to the table: When your product creates a new category or introduces a novel feature set, value-based pricing can help you avoid undermining the value story you’re trying to tell. Think of early productivity tools, vertical SaaS, or niche platforms that solve highly specific pain points.

• The customer’s perception of value varies by segment: Value-based pricing can help you segment based on use case or outcomes. For example, the same analytics platform might be priced very differently for a solo consultant, a growth-stage startup, and an enterprise operations team. Each customer values the product differently and expects to pay accordingly.

• You’re selling emotion, status, or identity: Value can also be about how people want to see themselves or be seen by others. If your product carries brand weight, aesthetic value, or emotional resonance, price accordingly. Luxury goods, thoughtfully designed software, and even newsletter memberships with highly loyal followings often succeed here.

Benefits of value-based pricing

Value-based pricing sets prices in line with the actual utility or desire your product creates. This type of pricing can lead to better margins, stronger product-market fit, and a pricing model that can change as the product does. If you can get close to what customers feel the product is worth and deliver on that promise, value-based pricing can give you the room to grow without constantly discounting or explaining yourself.

Risks of value-based pricing

Value-based pricing is harder to calculate than cost-plus or competitor-based pricing. It demands more research, more iteration, and more attention to your customers’ behavior, rather than just their words; customers might not always be accurate in predicting what they’re willing to pay.

For this model to work, you have to understand:

• What problem your customers are solving

• What that problem is costing them (in time, money, energy, and stress)

• What outcomes would make your product “worth it”

• How that value is changing over time

Then you need to communicate that value. Customers are less likely to pay for value they can’t fully understand.

Is cost-plus pricing effective for new products?

With cost-plus pricing, you add up what it costs to build and deliver your product and add on a margin to set your price. Cost-plus pricing can help protect your margins so you’re not selling at a loss, and it’s often simpler to implement than other pricing strategies. It’s tidy and predictable, and it’s commonly used in industries such as retail and manufacturing.

This strategy works best when:

• Cost structures are well-defined and consistent: Businesses that sell physical products—especially those with complicated supply chains—often find it easiest to calculate and use cost-plus pricing.

• The market already has anchors: If you’re entering a mature category with stable pricing and expectations, a cost-plus model might get you to a competitive, acceptable price without too much complexity.

• You’re selling B2B to procurement teams: Some buyers want pricing to be justified in unit costs and margins. In these cases, cost-plus might even be required.

• You’re using it alongside other inputs: Cost-plus pricing is more strategic when used in combination with value-based insights or competitor benchmarks. It can act as a reality check rather than an isolated strategy.

Benefits of cost-plus pricing

Cost-plus pricing is easy to calculate, easy to defend internally, and it can help ensure financial viability per unit. It also offers predictability in early-stage financial planning by providing you with a hard lower limit: you know you need to price above cost to stay viable in the long term.

Risks of cost-plus pricing

When you’re launching a new product, cost-plus pricing doesn’t always tell the full story. It centers on your inputs, your spreadsheets, and your required margin, but it doesn’t show what the customer actually values or is willing to pay. You might underprice a product with high-perceived value or overprice a product that isn’t seen as worth it by the market.

It also ignores how your competition is positioned. If your cost structure is higher than a competitor’s because of better materials, smaller scale, or early-stage inefficiencies, cost-plus pricing might push you into an uncompetitive price bracket.

How to choose the best pricing strategy for your launch

Pricing is about choosing the right trade-offs. The strategy you pick at launch can shape what customers you attract, how fast you grow, what customer segments you retain, and how the market reads your product. Here’s how to navigate your pricing strategy for launch.

Start with your launch objective

Each pricing strategy for new products serves different goals:

• If you need to grow fast, consider penetration pricing.

• If you need to recover R&D costs, consider skimming.

• If you’re trying to maximize margins right away, consider value-based pricing.

• If you want to ensure financial viability per unit, consider cost-plus pricing.

Be honest about what matters most in your first 6–12 months. Your pricing strategy should reinforce your launch goals.

Consider your market position

If you’re first to market, you have room to experiment. There’s no pricing anchor yet, so you can frame perception from scratch, often through a value-based or skimming model.

If you’re in a crowded space, penetration or competitive pricing can help you win much-needed attention fast—but only if your product delivers enough differentiated value to hold that attention.

If you’re going upmarket, skimming can reinforce your product’s legitimacy with enterprise buyers—especially if there’s a clear quality, capability, or support gap between you and cheaper alternatives.

If you’re going downmarket, you might need to offer more granular pricing tiers, usage-based structures, or initial discounts. Just make sure you’re not eroding your long-term pricing power.

Where you’re entering the market shapes how aggressively you can push on price and how much room you have to raise or lower it later.

Know your customer profile

Pricing involves psychology: it invokes expectations, urgency, and comparisons.

As you consider a pricing strategy, answer the following questions:

• How price-sensitive are your customers?

• What do they already pay for the alternatives?

• What signals reliability or quality in this space?

• What problem are you solving and how painful is it for customers?

Small price differences can change the adoption velocity for consumer products. But buyers for B2B tools, especially ones tied to revenue or efficiency, are often less price-sensitive if the value is clear and the cost to switch is justified. Price can be the reason customers buy, but it can also be what makes them take you seriously—knowing the distinction is important.

Factor in your cost structure

Your pricing needs to be financially viable. Calculate your break-even points and margins, and keep that math in the background—but don’t let it be the sole deciding factor that results in a price that doesn’t make sense to your customer or the market you’re trying to enter. If you’re early in production, your unit costs might be artificially high. If you’re overbuilding features for launch, you might be inflating your own floor.

Match pricing to your positioning

Pricing is positioning. A $19 product and a $190 product tell very different stories—even if their functionality overlaps. If you’re positioned as the elegant, high-trust alternative in a crowded space, pricing too low can damage your credibility. If you’re pitching accessibility, automation, or scale, pricing too high cuts off the segments you’re supposed to be serving. And if you’re trying to replace something expensive with a simpler and more affordable option, your pricing has to prove that. Every number you publish teaches the market what kind of company you are.

Consider your ability to adjust later

If you’re using a billing system such as Stripe Billing that lets you run pricing experiments and iterate without a major engineering lift, take advantage of that flexibility to learn in real time.

Pricing changes are always more sensitive post-launch. So think ahead: if you’re going in low, what’s your ramp-up plan? If you’re starting high, how will you handle the first discount or the first price cut? Pricing strategy is also growth strategy.

How to roll out and adjust your pricing after launch

Your launch price is a starting hypothesis. But you’ll have to change pricing strategically once you’ve established customers, revenue patterns, and expectations. In fact, some growth consultants recommend that newer companies adjust their pricing every six months. Here’s how to approach this next phase.

Use early data

You’ll start learning immediately. Are customers converting at the rate you expected? Are you attracting your target audience? Do customers stick around or churn quickly? Is your support load manageable, or is your price attracting the wrong usage?

Watch for patterns in usage, retention, and complaints, in addition to the signals buried in your customer support queue. If your price is out of sync (e.g., it’s too high for what people understand, or too low for what they expect), it’ll show up fast.

Test before you commit

You don’t have to change pricing across your whole customer base overnight.

Instead:

• Run A/B tests with different pricing tiers to see how conversion or retention shifts.

• Roll out new prices by region, channel, or segment to isolate variables.

• Offer different packages or plans to different cohorts and track their behavior.

• Offer annual plans at the original price as a buffer before raising monthly rates.

You’re testing your product’s perceived value. If a higher price doesn’t hurt conversion, or if a lower one doesn’t drive better retention, you’ve learned something valuable.

Clearly communicate any changes

No one likes a surprise price increase. Communicate clearly and handle the transition with care. Allow existing users to continue with the old price for a fixed period; pair increases with tangible value additions such as new features, better support, or faster performance; and give advance notice explaining why the price is going up. If your product has improved, say so.

It’s also a good idea to offer options, such as annual discounts, tiered plans, or temporary credits for customers who have recently upgraded. Your tone and timing matters: if customers feel respected and understand what they’re paying for, they’re more likely to stay.

Be deliberate about discounting

Introductory offers or launch discounts can be effective, but they need a sunset plan. If you led with penetration pricing or aggressive early deals, you’ll eventually need to shift toward long-term sustainability.

That means:

• Defining a transition path (e.g., “after three months, pricing will shift to X”)

• Giving customers reasons to stay (e.g., product quality, support, ongoing improvements)

• Being ready for some churn and knowing which customers are worth fighting to retain

Price-sensitive customers will likely leave when prices go up if your only value proposition was affordability.

Consider tiering, usage-based models, or packaging changes

After launch, you’ll know more about how different customers engage with your product. That’s a chance to match pricing more closely with usage or perceived value.

You might:

• Introduce tiered plans (e.g., light, pro, enterprise) with features or limits that match each group’s needs

• Add usage-based pricing if there’s a clear metric that scales with value delivered (e.g., number of seats, application programming interface (API) calls, volume processed)

• Repackage features based on what customers actually use

Make sure your pricing reflects your diversifying user base. Modern tools such as Stripe Billing make this kind of iteration easy to implement without overloading your engineering team.

Keep monitoring and adjusting

The first price is rarely the final one. Regularly review pricing performance, run small tests when behavior shifts, talk to customers, and stay aware of how competitors are pricing. Over time, you’ll start to see where your pricing is working and where it’s holding you back.

Pricing is a continuous conversation between your business, your product, and your customers. The more you engage and understand that conversation, the more flexibility and useful data you’ll have as you grow.

How Stripe can help

Stripe Billing lets you bill and manage customers however you want—from simple recurring billing to usage-based billing and sales-negotiated contracts. Start accepting recurring payments globally in minutes—no code required—or build a custom integration using the API.

Stripe Billing can help you:

• Offer flexible pricing: Respond to user demand faster with flexible pricing models, including usage-based, tiered, flat-fee plus overage, and more. Support for coupons, free trials, prorations, and add-ons is built-in.

• Expand globally: Increase conversion by offering customers’ preferred payment methods. Stripe supports 100+ local payment methods and 135+ currencies.

• Increase revenue and reduce churn: Improve revenue capture and reduce involuntary churn with Smart Retries and recovery workflow automations. Stripe recovery tools helped users recover over $6.5 billion in revenue in 2024.

• Boost efficiency: Use Stripe’s modular tax, revenue reporting, and data tools to consolidate multiple revenue systems into one. Easily integrate with third-party software.

Learn more about Stripe Billing, or get started today.