The Hidden Cost of Bad Pricing: Lessons from Founders and Pricing Experts

Pricing is one of the most important decisions a startup makes. It’s also one of the easiest to get wrong.

At its core, it sounds like an easy question to answer: How much should I charge for my product? But the experts we spoke to argue that pricing isn’t just a revenue decision. It’s about positioning and messaging.

So we asked pricing experts, professors, authors, and founders about pricing realities and strategies that have worked.

They shared their insights here:

Common Mistake: Missing Your Value Story

Founders often underprice not because they’re generous. Often, pricing decisions are made without a founder having clearly defined the value they’re delivering.

“Price is the value that the customers pay,” Saloni Firasta-Vastani, author of Purpose Driven Pricing and a professor at Emory University’s Goizueta Business School, told Hypepotamus. While that sounds simple, she says it’s one of the hardest mental shifts for entrepreneurs, especially technical founders who start from a “problem-solution” lens rather than a lens that focuses on the economic value they create for their customers.

And that value isn’t always static.

Firasta-Vastani emphasized that value can be created across the full lifecycle of the product relationship, including customer support, warranty, and even end-of-life considerations. All such factors shape what customers perceive as worth paying for.

“Product market fit is important,” she said, “but I think it’s very important to have a product market monetization fit.”

Common Mistake: Skipping Out On Research

Another common and costly mistake? Not thinking enough about what the price should be.

CEO of Best Kind Consulting, Carolyn Crewe, sees this often with B2B Saas/AI founders she works with. She said she sees founders "make pricing decisions based on gut feel, fear, or 'what feels reasonable' rather than understanding the value buyers get from the outcomes you deliver."

Even worse, they just copy competitors. "I know why founders do this, but it still pains me. They look at competitor prices and then charge just a little bit less to undercut them and try to get customers. Everyone is guessing their prices," Crewe notes. "How comfortable are you with putting your financial livelihood on someone else's guess?"

John Ray, podcast host of "The Price and Value Journey" and author of The Generosity Mindset, argues that what looks like a pricing mistake is often a customer discovery mistake.

Founders fail at “understanding where clients see value, both tangible and intangible, in the problems you solve,” he told Hypepotamus. When that discovery is missing, startups fall back on what’s easiest: Competitor comparisons, cost-plus thinking, or pricing by intuition.

Another major reason startups struggle with pricing is that they price what’s easiest to describe rather than what’s most valuable. Crewe said this often looks like a founder focusing on “pricing features instead of outcomes,” meaning they sell what the product does rather than what customers get from using it.

Calculating External Factors

Founders often treat pricing like a number they set once. But that doesn’t work in an ever-shifting market.

Ray explained that external factors shift pricing power by changing “client-perceived value, risk, the alternatives they perceive, and their willingness to pay.” He points to the COVID pandemic as a clear example. Products like hand sanitizer and toilet paper weren’t inherently “better,” but their perceived value surged. Prices followed.

Ryan Robinett, Principal at Birmingham, Alabama-based Multiply, added that economic and political conditions are often the biggest pressure point for startups.

Robinett also offered a useful counterpoint. The types of businesses most resistant to pricing pressures are the ones whose products add revenue, not just reduce costs. Cost-cutting tools can become “the cost” over time — but revenue generation tends to create a more durable willingness to pay.

“Fair or not, those that reduce costs eventually become the cost, whereas if a product or service adds to the top line then there tends to be an insatiable demand for more revenue,” he added.

The Hidden Costs Of Free

Multiple experts we talked to warned against rushing into freemium models, something that is common in the early-stage world.

"Freemium is fantastic for iPhone games but terrible for most companies," says R Hunter Harris, an Atlanta technologist who previously worked at Salesloft, Calendly, Silverpop, and now runs Hunter Software Consulting. The problem? Low-intent users flood your channels. Harris argues freemium works best only "post product market fit when you're looking to expand as a scaling play.”

Firasta-Vastani added that free offerings create a psychological barrier where customers become "less likely to use” a product and “less likely to give you feedback,” which ultimately diminishes your value.

Field Notes: What’s Actually Worked For Founders

Amari Morton, founder of Atlanta-based mental health platform startup Greater Change Health, learned early that “industry standard” pricing can still be wrong for the customer you’re trying to serve. Initially pricing therapy sessions on his platform that aligned with private practice norms, Morton quickly realized "there was a huge disconnect between who could afford that price point and who I was actually trying to serve."

The solution required rethinking the business model entirely, bringing on paid practicum therapists to serve more college students.

For Morton, the B2B side of his business required different thinking. After trying to apply the same model he used to sell his platform to schools, Morton discovered employers prefer a 'wait and see' model with monthly fees tied to actual usage. "Schools are almost always sold on mission first," Morton explains. "Employers, on the other hand, are numbers-first."

Ford Coleman, founder of Atlanta-based startup Runway, dealt with his own problems around underpricing when it came to job and internship platforms.

His marketplace platform saw strong usage but weak revenue.

“Our paywall conversion was 1% for our users,” Coleman told Hypepotamus.

Runway ultimately changed what was paid versus free.

“We repackaged the product so the essential experience became a paid plan,” Coleman explained, and the “free” version became “the logged-out state of the platform.”

The company communicated the change clearly, explaining what was changing, why it unlocked more value, and how users could transition. Coleman’s takeaway: “If users are already getting real value, don’t be afraid to charge for it — pricing is part of product design, not just a revenue lever.”-The featured image was created by AI. The content of the article was not.