# When to use these instructions Use this skill whenever the user is deciding how to make money from their app: picking a pricing model, designing tiers, choosing free vs trial vs freemium, or figuring out what to charge. This is the strategy layer above Payments — Payments is HOW to wire Stripe, Monetization is WHAT to sell and for HOW MUCH. --- # Monetization The strategy layer above Payments. Payments is plumbing — you wire up Stripe, checkout works, money flows. Monetization is the harder question that comes first: what should you charge, who should you charge, and how do you turn visitors into paying customers? This skill is opinionated. Most beginners overthink monetization and ship nothing. The fix is to pick one model, set one price, and iterate from real usage data — not from imagined customers. ## When to use this - The user has a product idea but no pricing yet. - The user is launching and needs to pick a pricing model. - The user is stuck on "should this be free or paid?". - The user wants to add a free trial, freemium tier, or upgrade flow. - The user is asking "how much should I charge?". ## The four monetization models (pick exactly one to start) ### 1. One-time purchase **Charge once, deliver forever.** Best for: tools, templates, courses, ebooks, desktop apps, lifetime deals. - **Pros:** simplest billing, no churn, customers love it - **Cons:** no recurring revenue, growth requires constant new customers - **Stripe mode:** `mode: "payment"` - **Example:** $49 for a Notion template, $199 for a course ### 2. Subscription (SaaS) **Charge monthly or yearly for ongoing access.** Best for: web apps, tools people use weekly, anything where the value is ongoing. - **Pros:** predictable revenue, compounds over time, supports growth - **Cons:** churn is real, customers expect updates and support - **Stripe mode:** `mode: "subscription"` - **Example:** $19/mo for a project management tool, $99/yr for a habit tracker ### 3. Freemium **Free tier with limits, paid tier removes them.** Best for: products with viral or network effects, tools with clear "pro" use cases. - **Pros:** low friction signup, free users market the product - **Cons:** support cost for free users, free tier must be useful but not too useful - **Trap:** if your free tier is too generous, nobody upgrades. If too stingy, nobody signs up. - **Example:** Notion (free for individuals, paid for teams), Linear (free up to 250 issues, paid above) ### 4. Free trial → paid **Full product free for N days, then card required.** Best for: high-intent B2B tools where the value is obvious in days. - **Pros:** customers experience full value before paying, high conversion - **Cons:** higher signup friction (some require card upfront) - **Two flavors:** card-required (higher conversion to paid, lower signups) vs no-card-required (more signups, lower conversion) - **Example:** Linear (14-day trial), Notion teams (no card trial) ## How to pick the right model Ask the user three questions: 1. **How often will they use it?** Daily/weekly → subscription. Once/twice → one-time. 2. **Does it get more valuable the more they use it?** Yes → freemium or trial. No → one-time. 3. **Is there a clear "team" or "pro" use case?** Yes → freemium with team tier. If the answer is "I don't know", default to: **simple monthly subscription with one tier**. You can always add tiers later. You can almost never go from free to paid without losing users. ## Pricing the actual number The biggest mistake beginners make: pricing too low. Most indie products are underpriced by 3-5×. ### The three-anchor method List three prices in order: small / medium / big. Make the middle one the "recommended" tier. Most people pick the middle. Use the small tier as an anchor that makes the middle look reasonable, and the big tier as an anchor that makes the middle look like a deal. ``` Basic $9/mo (anchor low) Pro $29/mo (most popular ← this is what you actually want to sell) Team $99/mo (anchor high) ``` Most customers will pick Pro. Some will pick Basic (you still make money). A few will pick Team (you make a lot). ### Round numbers vs charm pricing - **B2C (consumers)**: `$9`, `$19`, `$29` work fine. `$9.99` feels dated. - **B2B (businesses)**: `$10`, `$25`, `$50` — round numbers signal seriousness - **Enterprise**: "Contact sales" — never list a number ### Annual discount Always offer annual billing at 2 months free (i.e. ~17% off): ``` Monthly: $29/mo Annual: $290/yr ($24/mo, save $58) ``` This gets you cash upfront and dramatically reduces churn (an annual customer can't cancel as easily). ## The free tier dilemma If you go freemium, the question is: **what goes in the free tier?** The right framing: the free tier should be **useful enough that someone recommends it to a friend**, but **limited enough that a serious user upgrades within a week.** Common limits: - **Quantity**: 100 records, 5 projects, 10 team members - **Frequency**: 100 API calls/day, 3 messages/hour - **Quality**: standard models in free, premium models in paid - **Features**: basic features free, "pro" features paid (auto-export, custom branding, integrations) - **Time**: free for 14 days, paid after **Avoid:** - Watermarks (feels cheap and frustrating) - Bait-and-switch ("you can use this... oh wait, that's pro") - Limiting things that are basically free for you to provide ## Free trial design If you go with free trials: - **Length**: 7 days (consumer) or 14 days (B2B). Longer = more abandonment. - **Card upfront?** Higher conversion but lower signups. Default: no card upfront for B2C, card upfront for B2B. - **Trial reminder emails**: day 1 (welcome), day 3 (here's what you can do), day 7 (3 days left), day 13 (last chance), day 14 (trial ended). - **Auto-charge or auto-cancel?** If card upfront, auto-charge. If no card, auto-cancel and email. ## Conversion psychology — small things that move the needle - **"Most popular" badge** on your recommended tier increases conversion by 10-30%. - **Annual pre-selected** in the toggle gets you more annual signups. - **Show savings**: "$58 off" or "2 months free" — make the savings visible. - **Money-back guarantee**: "30-day money back, no questions asked" reduces buyer hesitation. Refund rate is usually <2%. - **Social proof on the pricing page**: "Join 1,200 indie hackers" or testimonial quotes near the pricing tiers. - **No "free forever"** unless you really mean it — say "free plan" instead. - **Show the limit before they hit it**: "You're using 4 of 5 projects" with an "Upgrade" button. ## Pricing changes **Two rules:** 1. **Grandfather existing customers.** When you raise prices, existing customers keep their old price forever (or for 1-2 years). This builds massive goodwill and they tell others. 2. **Announce changes 30 days in advance.** Email all customers, explain why, and let them lock in the old price by upgrading to annual. Most indie SaaS founders RAISE prices over time as the product gets better. That's normal and expected. ## What to track Once monetization is live, watch these metrics weekly: - **Signups/day** — top of funnel - **Activation rate** — % of signups who actually USE the product - **Free → paid conversion rate** — typically 2-5% for freemium, 15-30% for trial - **MRR (Monthly Recurring Revenue)** — the headline number - **Churn rate** — % of paying customers who cancel each month. <5%/mo is healthy. - **LTV (Lifetime Value)** — average revenue per customer over their lifespan - **CAC (Customer Acquisition Cost)** — what you spent to acquire them. LTV should be >3× CAC for a healthy business. ## Common mistakes to avoid - **Pricing too low.** Most indie products are 3-5× underpriced. Charge more. - **Too many tiers.** 3 tiers max. 5 tiers paralyzes buyers. - **Free tier too generous.** Nobody upgrades. The Pareto rule: free should cover 80% of casual use, not 80% of pro use. - **Hiding pricing.** "Contact us" loses 90% of buyers. Show numbers. - **No annual option.** You're leaving 30%+ of revenue on the table. - **Discounts on launch.** Don't discount before you have proof people will pay full price. - **Building features for non-paying users.** They will never pay. Build for the people who already gave you money. - **Going freemium without a plan to convert.** "Free + Pro" with nothing pushing users to upgrade = 0% conversion. - **Picking the model that "feels cool" instead of the right model.** SaaS is trendy but most products would be better as one-time purchases. - **Waiting for the perfect price.** Ship a price. Iterate. ## Getting unstuck If the user is paralyzed: 1. Pick **monthly subscription, single tier, $19/mo**. 2. Ship it. 3. Get 10 paying customers. 4. Talk to them. Find out what they'd pay double for. 5. Iterate from real data. You can always change pricing later. You can never get launch momentum back. ## Going deeper - Monetization: https://www.codebooks.ai/monetization - Payments: https://www.codebooks.ai/payments - Analytics: https://www.codebooks.ai/analytics --- This skill is part of the **CodeBooks Vibe Coding Skills Library**. Browse all skills, install guides, and the source chapters at https://www.codebooks.ai/skills