Freemium or premium? What your pricing model says about your startup

Your pricing model isn’t just about money, it sends a message to your customers. 

Whatever route you take, whether free, freemium or premium, you’re making a statement about who your product is for, how it delivers value, and what kind of company you’re building.

Whether you're pre-revenue or scaling fast, your pricing isn't a tactical afterthought, it’s a strategic lens. 

Picking the wrong model can slow you down before you've even started.

In this post, we’ll explore the signals your pricing model sends, the pros and cons of each approach, and when to change your pricing model. 

Pricing is positioning

Your pricing model is your positioning, it’s one of the first things your customers notice. 

A premium price tag can indicate a service that is worth paying for while a freemium model suggests the company is looking to get users on board quickly. 

Each sends a different message and shapes how people think about your product.

Pricing instantly signals:

• Target audience. Are you for individuals, startups, or enterprise teams?
• Product value. Are you solving a must-fix pain point, or offering a nice-to-have?
• Confidence level. Are you leading with bold value, or playing it safe to win attention?
• User experience expectations. Are people expecting help with onboarding or self-serve simplicity?

As well as perception, it’s about how you structure your business. Pricing determines how quickly you generate revenue, who you attract, and how much support infrastructure you need to sustain them.

“Pricing is the crystallisation of your business strategy.” - Patrick Campbell, ProfitWell 

If your pricing doesn’t match your product’s value, you risk confusing the market or signalling insecurity. 

It’s important to be deliberate because if you don’t control your brand’s positioning, your pricing will do it for you.

Freemium: great for growth, risky for focus

Freemium is the go-to move for many startups looking to build traction fast. It promises viral adoption, plenty of top-of-funnel leads, and easy onboarding.

Often it works well, especially for products with broad appeal and low marginal costs.

Freemium can help you:

• Generate word-of-mouth growth.
• Gather product usage data quickly.
• Attract users from adjacent or untested markets.
• Remove barriers to trial for cautious buyers.

However freemium is not always an effective monetisation model, it’s more of a growth lever. 

If you can’t convert free users into paying customers at scale, it’s not working. 

To make freemium work, you’ll need:

• Clear upgrade paths. Features, usage limits or benefits that users want to unlock.
• Deep user engagement. A product that people use frequently and rely on.
• Strong product-market fit. Users must see real value quickly. 
• Volume. With average conversion rates of just 2–5%, you’ll need a lot of traffic to make it work

There are trade-offs too. For example, free users can dominate support queues and dilute product feedback. 

Your teams may be tempted to chase vanity metrics instead of monetisation, whole long free usage cycles delay valuable pricing feedback

Used well, freemium builds momentum. Used badly, it can undermine your focus.

Premium-only: high expectations, high returns

Premium pricing does something freemium never can, in that it forces your customer to value your product immediately.

When users pay from day one, you’re no longer just collecting signups. 

You’re building commitment, and that’s a very different dynamic. It changes how you build, sell, and support your product.

Premium pricing works best when:

• You're solving a clear, painful problem.
• You offer business-critical functionality.
• You serve a niche or enterprise market.
• Your product has a strong onboarding experience or success path

Superhuman is a classic example. Its $30/month invite-only email app positioned itself as elite, fast, and designed for productivity power users . 

The price was both a revenue choice and a brand statement, but premium pricing comes with pressure:

• You need to prove value instantly. Ideally within minutes, not weeks
• Users expect personalised onboarding, quick wins, and excellent support
• You’ll need to support more complex sales cycles (especially in B2B).

The benefit of this approach is that you receive a clear signal that people are willing to pay for your product. 

That’s powerful validation and a far stronger growth foundation than free usage alone.

The hybrid model: flexibility with focus

Hybrid pricing, with freemium and premium options, is increasingly popular.

This is because it provides the best of both worlds, both the reach and accessibility of freemium, and the revenue potential of a premium model. 

However, it only works if the upgrade path is logical, valuable, and easy to act on.

Here’s how leading companies approach hybrid pricing:

• Notion offers full functionality for solo users, but monetises through collaboration and admin features. 
• Zapier offers basic automation for free, then upsells advanced workflows, app integrations, and performance boosts. 
• Loom provides a limited number of free videos, then nudges users to upgrade as usage increases. 

This model works well when:

• Your product serves multiple user types (e.g. individuals vs. teams).
• You have natural usage or collaboration breakpoints.
• You can deliver value early, and more value later. 

When using hybrid pricing you need to make the value difference obvious. Confusing paywalls or poorly gated features will frustrate users and hurt conversions.

If you get it right though, you can create a seamless journey, from casual trial to committed customer.

When (and how) to shift models

Startups often treat pricing like a set-it-and-forget-it decision, but it shouldn’t be like that. 

Your pricing model should evolve as your business matures. Early-stage validation demands different pricing dynamics than scaling or going upmarket.

Here's a simplified guide:

Signs it might be time to switch pricing models include:

• Low conversion from free to paid.
• Attracting too many unqualified users.
• Customers not seeing the value you're trying to charge for.
• Your sales or support model is misaligned with how users enter the product.

Shifting models can be painful, but staying too long with the wrong one is worse. Monitor your activation, upgrade and churn metrics closely and adjust accordingly.

Summary: Your pricing is your pitch

Your pricing strategy is a direct reflection of your value proposition, growth strategy, and customer focus.

• Freemium gives you fast growth and volume, but only if you design for conversion.
• Premium gives you validation and focus, but demands that you deliver value early and clearly.
• Hybrid gives you reach and revenue, but only with a seamless upgrade path.

Pick the model that aligns with your product, your stage, and your ambition. And don’t be afraid to evolve as you grow.

If you're considering a pricing shift or planning a new product launch, ask yourself:

• Are we attracting the right users, or just the most users?
• Is our pricing helping us learn faster, or holding us back?
• Have we built clear, compelling paths from entry to value?