Sell based on value, and make it easy to buy

How you price your AI product isn’t just a business decision — it’s a signal of how well you understand your customers and the value you provide. Even though AI is new and revolutionary, the same pricing fundamentals still apply.

In a recent Seed to Sequoia podcast episode, Luke Hohmann emphasized a critical insight for AI founders: “Don’t just give your product away — make sure your pricing reflects the real value you’re delivering.”

Freemium models and complex pricing structures might seem like ways to attract customers, but they can undermine your growth and confuse your buyers. Instead, focus on two principles: value-based pricing and simplicity.

Price Based on Value

For AI companies, value is often tied to the outcomes your product delivers. If your AI helps automate support tickets, consider pricing per resolved ticket. If your model improves sales forecasting, link pricing to revenue gains or efficiency improvements.

Outcome-based pricing ensures your customers see the connection between what they’re paying and what they’re getting. As Luke put it, “You’re aligning incentives — customers only pay when they see results.”

Sometimes tying price directly to outcomes is either impractical or creates risk to you because you don’t fully control the outcome. For example an AI ad generator might consider charging per click received, or per conversion–except there’s no easy way to track that.

You can, however, still charge based on value. If your better-performing ad creative will generate 3x more conversions, and each conversion is worth $300, there is value to be captured far beyond the cost of generating the creative.

Make Buying Easy

AI solutions are already complex. Your pricing shouldn’t be.

• Avoid Hidden Fees: Transparency builds trust.

• Simplify Tiers: Offer clear, predictable options.

• Communicate Clearly: Your customers should understand your pricing in seconds, not minutes.

If your buyers have to decode your pricing, you're introducing friction. Simplify it.

It’s no different for companies with account execs and enterprise sales motions. Obviously, your pricing has to be simple for a product led growth or self-serve motion, or you’ll see lower conversions, support requests, and more. But it’s the same for enterprise sales. Simple, straightforward pricing will enable your account execs to be trained faster and close deals faster.

Later, when the industry matures and you know better which features are the most valuable, and what your customers need, you can make your pricing more complex. Don’t forget that building all that complexity into your product will take time away from other things, like building features your customers would be willing to pay to use (or which might ehlp retention)

Freemium vs Giving it Away Free

Freemium is very different than giving unpaid access for a few customers for a limited period of time. Successful freemium strategies requires a deep understanding of what the key value drivers are of your software, so that you can guide customers to doing them and then rapidly convert them to paying customers. This requires well considered product design, tooling and automation to get them to upgrade. Not investments you want to make before you’ve figured out what works.

Personally I’d still rather see all customers pay something at all times, but there are valid reasons to let them try an alpha version for free. Just be very aware that not paying changes someone’s mindset: they’re more willing to put up with mistakes, but less committed to making the solution work. In this scenario, you also avoid the need for sophisticated tooling required to make freemium successful. Just send an invoice when they’re ready to pay.

The Takeaway

For founders and CEOs in AI, customer-centric pricing means two things:

1. Price based on the real value you create.

2. Make it ridiculously easy for customers to understand and buy.

When you get these right, you not only increase revenue — you build stronger relationships with your customers. While it can be tempting to give things away for free–or use freemium as a strategy–both can be costly distractions.