The Premium Trap: Why Your SaaS Pricing Strategy Might Be Painting You Into a Corner
Let's be honest: we all want to build valuable products that customers love. But there's that other kind of value we need to talk about—the kind that shows up in your ARR.
If you're leading product at a Series B+ company right now, you're probably feeling the pressure to nail both. Build something amazing AND make it rain. Simple, right?
Not quite. The path between "great product" and "healthy revenue" isn't exactly a straight line.
Unfortunately, many of us are falling into what Duolingo's Head of Product, Cem Kansu, calls "The Premium Trap." It's a pattern that seems logical on paper but could be secretly sabotaging your product's future.
Why the Premium Model is So Tempting
It starts innocently enough. You're looking at your LTV and CAC numbers, and the math seems crystal clear: if you can make more from each customer than it costs to acquire them, you can build a paid marketing engine and scale to the moon.
It's the kind of straightforward math that makes your board smile.
But, alas, projections rarely pan out the way you think they will. Kansu describes how he's seen this pan out in the education app space time and time again:
"[With this model,] all your growth effectively comes from paid marketing," he says. "You start spending a lot of your efforts—whether that's your time, whether that's your leadership bandwidth, or whether that's your actual cash in the bank—on marketing rather than building an excellent product."
And if all that great marketing is funneling people into a lackluster product, well...
The 2 Ways We're Trapping Ourselves
1. The Innovation Trade-off Nobody Talks About
Remember when you first fell in love with product management? I bet it wasn't because you were excited about optimizing marketing spend. But that's precisely where many of us end up spending our time when we go all-in on a premium model.
If you use it and you like it, you tell your friends. If everything is paid, most people don't even get access to it and don't tell their friends.
- cem kansu, head of product, duolingo
It sounds obvious when you hear it, but with so many teams under pressure to make decisions based purely on data and calculations, it can be easy to forget the context outside of our analytics dashboards.
This concept is consistent with what Melissa Perri refers to as "the build trap"—where we get so caught up in short-term metrics that we forget why we're building in the first place.
2. The Point of No Return
Why is it called a 'trap'? Because once your product is in it, it's incredibly hard to get it out.
Think about it—how do you tell your board that you want to make your premium features free to build organic growth? That you want to intentionally slow down revenue growth to build a more sustainable engine?
Breaking Free: A New Framework
Getting out of the Premium Trap is a problem too complex for the scope of this article, but avoiding it is much more straightforward.
Here's how Duolingo did it:
1. Find Your Growth Engine
Before you lock down your monetization strategy, you need to really understand what drives organic growth in your market.
The key is to identify which parts of your product create network effects and viral growth opportunities. Kansu says they considered these factors when making decisions around which features should be free and which should be paid.
"If you make it a free feature, does it help user growth more? Or if you make it a paid feature, does it help revenue more?" he says. "I think you can use your best judgment—or if not, you can test and see what happens."
2. Draw Your Lines in the Sand
One thing I love about Duolingo's approach is how clear they are about what they won't monetize. They call these their "sacred cows"—for them, it's educational content.
What's yours?
In my experience, the best product leaders can tell you instantly what features or capabilities they'll never put behind a paywall.
3. Test Smart, Not Just Often
As I'm sure you can imagine, Duolingo does a lot of A/B testing—and while we're all running A/B tests (probably too many), Kansu warned about what he calls the "local maximum trap."
"If all you tested is like the button color, the pixel by pixel, and very small things, then you're never testing what a completely different imagined version of that feature could be," he says.
What This Means for You
If you're reading this, you're probably asking yourself some hard questions right now. Good!
Here are three more that I think every product leader should think about:
- Which features in your product have the potential to create genuine organic growth?
- What aspects of your product are truly worth premium pricing?
- How is your current monetization strategy affecting your team's ability to innovate?
Where Do We Go From Here?
Successful products find ways to align business success with customer success, and that means aligning monetization with innovation.
The premium trap isn't inevitable. However, avoiding it requires us to be intentional about our strategy and clear about our principles.
It means sometimes making the harder choice between easy growth and sustainable growth.
What Duolingo's journey can teach us is that it's possible to build a product that's both loved and profitable—but before your customers can fall in love, you've got to give them a chance to get to know you.
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