Pricing 101: Why Indian Founders Undercharge

McKinsey, analysing thousands of pricing decisions across industries, found that a 1% improvement in price lifts operating profit by an average of 8.7% – more than a similar improvement in variable costs, fixed costs or volume. Yet the same research estimates that up to 30% of pricing decisions fail to deliver the best price. If you are an early-stage Indian founder, the odds are high that your pricing is one of those decisions.

Most founders in India do not overcharge. They undercharge. They price on fear – fear of losing the deal, fear of the customer saying “too expensive”, fear that India will not pay. This post is a plain-language guide to why that happens, what it costs you, and how to fix it without losing your customers.

Why Indian founders price with fear

Three forces shape how a first-time founder in India thinks about price:

• The “India is price-sensitive” story. You have heard it from investors, family and Twitter. It is half true: Indian buyers negotiate hard and compare everything. But price-sensitive is not the same as price-only. UPI apps, iPhones and Starbucks all sell in India. Buyers pay when the value is obvious and the alternative is painful.
• The free-everything decade. When Reliance Jio launched in September 2016 with free calls and near-free data, it reset what a whole generation of consumers expected to pay for digital services. Founders building on top of that market absorbed the same expectation: grow first, charge later. Jio could afford that strategy because it had tens of billions of dollars behind it. You probably do not.
• The cost-plus habit. Many founders price like this: “It costs me Rs 400 a month to serve a customer, so I will charge Rs 999 and make a healthy margin.” That is cost-plus pricing. It feels rational and it quietly caps your business, because it prices your costs instead of the customer’s outcome.

The maths of undercharging

Say you run a small B2B SaaS with 100 customers paying Rs 999 a month. That is Rs 99,900 in monthly revenue. Now suppose you priced on value instead of fear and charged Rs 1,499 – a 50% increase – and 10 of your 100 customers left over it. You would have 90 customers and Rs 1,34,910 a month. You lost 10% of your customers and grew revenue 35%. And the customers who leave over a price increase are usually your most expensive ones to serve: the most price-sensitive, the most support-hungry, the least loyal.

This is why McKinsey’s number matters so much. A 1% price increase drops almost entirely to profit, because your costs do not change when you charge more. A 1% increase in volume, by contrast, comes with the cost of serving that extra volume. Price is the most powerful profit lever you have, and undercharging throws it away.

Cost-plus vs value-based pricing

Value-based pricing means setting your price from the customer’s side of the table: what is the problem worth to them? If your software saves a business Rs 50,000 a month in salaries or recovers Rs 5 lakh a year in lost revenue, charging Rs 5,000 a month is not expensive – it is a 10x return.

Two Indian stories show the range. Zerodha priced equity delivery at zero and intraday trades at a flat Rs 20 when incumbents charged a percentage of every trade. That was not fear pricing – it was a deliberate strategy: undercut on a metric customers understood, win enormous volume, and make the maths work at scale. At the other end, Jio priced at zero to build the market, then raised tariffs step by step once hundreds of millions of users were locked in. The lesson is not “charge less” or “charge more”. It is that both companies chose their price as a strategy, with a plan. Undercharging by default is not a strategy; it is the absence of one.

Five signs you are undercharging

The simplest test: if nobody ever pushes back on your price, you are leaving money on the table. A healthy pricing conversation has some friction – a 20 to 30% “let me think about it” rate is normal. A 100% close rate is not a sales triumph; it is a pricing error.

How to raise prices without a revolt

• Raise prices for new customers first. Existing customers keep their rate for now; every new signup pays the new price. You learn whether the market accepts it with zero risk to your base.
• Grandfather, then migrate. Give existing customers notice – “from your next renewal, the price moves to X” – and a reason: new features, better support, rising costs. Most will stay.
• Add tiers, not just rupees. A good-better-best structure lets price-sensitive customers self-select down instead of leaving, while serious buyers pick the plan that matches their ambition.
• Review pricing every 6 months. Your product gets better every month; a price set two years ago describes a product that no longer exists.
• Tie the price to the outcome in every sales conversation. “This saves you 20 hours a month” reframes Rs 5,000 from a cost into a trade.

On average, a 1 percent price increase translates into an 8.7 percent increase in operating profits (assuming no loss of volume, of course). Yet we estimate that up to 30 percent of the thousands of pricing decisions companies make every year fail to deliver the best price.

McKinsey & Company, “Using big data to make better pricing decisions”

One last connection to your runway math: better pricing extends runway without raising a rupee of capital. In a market where, as we covered in where India’s startup funding went in 2026, capital is choosier than it was in 2021, the ability to charge what you are worth is not a nice-to-have. It is survival.

So here is a question worth sitting with: when did you last raise your prices – and what exactly are you waiting for?

Sources

• McKinsey – Using big data to make better pricing decisions
• McKinsey – Bringing discipline to pricing
• Reuters – Reliance unveils Jio with free calls, cut-price data (2016)
• Zerodha – Pricing (Rs 0 delivery, flat Rs 20 intraday and F&O)