Pricing Glossary
The most important pricing terms explained, with practical context for founders and product teams.
B
Break-Even Price
The break-even price is the price at which your revenue exactly covers your costs. It is calculated from variable costs, fixed costs, and your planned sales volume.
F
Freemium
Freemium combines a permanently free product version with paid plans. It only works when the free tier creates real value and a clear upgrade trigger exists.
P
Penetration Pricing
With penetration pricing you deliberately launch at a low price to win market share fast. The price rises later, which requires clear communication.
Price Ceiling
The price ceiling is the highest price your ideal customer is realistically willing to pay. It emerges from the quantified value, the customer's budget, and the prices of alternatives.
Price Floor
The price floor is the lowest price at which you can sell your product without losing money. It is derived from your costs and your realistic sales volume.
Price Skimming
With price skimming you launch at a high price and lower it step by step later. It fits products with strong differentiation and early adopters willing to pay.
Pricing Corridor
The pricing corridor is the range between your price floor and your price ceiling. Inside the corridor your price is a strategic choice; outside it, a mistake.
V
Value-Based Pricing
Value-based pricing anchors your price to the quantified value your product creates for the customer, not to your own costs or to competitor prices.
Van Westendorp Method
The Van Westendorp method (Price Sensitivity Meter) derives acceptable price ranges from four questions about price perception: too cheap, a bargain, getting expensive, too expensive.
W
Willingness to Pay (WTP)
Willingness to pay is the highest price a customer is prepared to pay for your product. It can be measured through interviews, price tests, and methods like Van Westendorp.