Pricing strategy

Pricing Strategy

Pricing Model Comparison

Model	Mechanics	Best for	Risk
Flat rate	One price, all features	Simple products, commodities	Leaves money on table
Per-seat	Price × number of users	Collaboration tools	Incentivizes seat minimization
Usage-based	Pay for what you use	APIs, infra, AI	Unpredictable revenue
Freemium	Free tier + paid upgrade	PLG, high-volume acquisition	Support cost, low conversion
Tiered	Starter/Pro/Enterprise packages	Most B2B SaaS	Tier cannibalization
Hybrid	Seat base + usage overage	Modern SaaS	Complexity

Hybrid Model Pattern (increasingly common)

Base fee: $500/month (includes 10 seats + 10k API calls)
Overage: $2/seat/month + $0.01/additional API call
Enterprise: Custom contract with committed minimums

Value Metric Identification

The value metric is what you charge for — it should scale with the value the customer gets.

Good Value Metric Criteria

• Customers understand it immediately
• It grows as customers get more value
• It's easy to measure and invoice
• It aligns incentives (you succeed when customer succeeds)

Finding Your Value Metric

1. List what customers do in your product
2. Identify what correlates with outcomes (revenue, time saved, risk reduced)
3. Pick the one that scales most naturally with customer success
4. Validate: do power users naturally consume more of it?

Examples by Category

Product	Value metric
CRM	Contacts / deals
Email tool	Emails sent / subscribers
Analytics	Events tracked / data volume
Collaboration	Active seats
AI API	API calls / tokens
E-commerce tool	GMV processed

Pricing Research Methods

Van Westendorp Price Sensitivity Meter

Four questions:

1. "At what price would this be so cheap you'd question quality?"
2. "At what price would this be a bargain?"
3. "At what price would this start to feel expensive?"
4. "At what price would this be too expensive to consider?"

Plot responses to find:

• Acceptable price range: between "too cheap" and "too expensive" crossovers
• Optimal price point: intersection of "bargain" and "expensive" curves

Gabor-Granger

Present fixed price points to segments. Ask: "Would you buy at $X/month?" Calculate demand curve. Find revenue-maximizing price.

Conjoint Analysis

Show customers trade-offs between price and feature bundles. Reveals willingness to pay for specific features.

Rule of Thumb

• Van Westendorp for early-stage directional data
• Gabor-Granger for demand curve with existing customer base
• Conjoint for packaging decisions with established products

3-Tier Packaging Template

	Starter	Pro	Enterprise
Target	Individuals / small teams	Growing teams	Large orgs
Price	$X/mo	$3X/mo	Custom
Seats	Up to 3	Up to 25	Unlimited
Core features	✓	✓	✓
Advanced features	—	✓	✓
Admin controls	—	Basic	Advanced
SSO / SCIM	—	—	✓
SLA / support	Community	Email	Dedicated CSM
Data retention	30 days	1 year	Custom

Tier Design Rules

• Middle tier should be the revenue maximizer (highest conversion × highest value)
• Enterprise tier is always "contact sales" — use to learn before pricing
• Starter → Pro upgrade should feel obvious, not punishing
• Limit to 3 tiers; more creates paralysis

Competitive Pricing Response Playbook

Scenario	Response
Competitor cuts price	Do not match immediately; research if they're winning deals on price
Competitor raises price	Opportunity to position as better value; may allow your own increase
New low-cost entrant	Protect enterprise with value story; let free tier compete at low end
Race to zero	Shift to usage-based or outcomes-based model to break the comparison

Price Positioning Options

• Premium: Higher price signals quality; requires differentiation evidence
• Value: Slightly below leader, emphasize ROI
• Penetration: Low to gain share; plan path to profitability

Price Increase Playbook

Pre-Increase Preparation

1. Segment customers by plan, tenure, expansion potential
2. Identify champions (power users who can advocate internally)
3. Prepare value story: what have you shipped since last pricing?
4. Draft FAQ: "Why is the price increasing?"
5. Decide on grandfather policy (existing customers locked for X months?)

Communication Template

Subject: Changes to [Product] pricing

Hi [Name],

We're updating our pricing on [date]. Here's what's changing:
[Old price] → [New price] for [plan name].

Why: [Value delivered — features shipped, infrastructure improved, support added]

Your options:
- Annual plan: lock in current pricing for 12 months (save X%)
- Stay on monthly: new price applies on [date]
- Downgrade: [link]

Questions? Reply to this email — our team will help.

[Name]

Grandfather Policy

• 3-6 month grace period for existing customers is standard
• Annual customers: honor rate until renewal
• Avoid indefinite grandfathering — it creates pricing complexity forever

Self-Serve vs Sales-Assisted Pricing

Scenario	Self-serve	Sales-assisted
ACV < $5k/year	✓
ACV $5k–$25k	Hybrid	Hybrid
ACV > $25k		✓
Complex procurement		✓
High-volume, simple product	✓

Enterprise Pricing Dynamics

• List price is a starting point — expect 20-40% negotiation
• Annual commitment in exchange for discount (15-30%)
• Multi-year deal for larger discount
• Pilot/POC before full deployment
• Legal / security review adds 4-8 weeks to deal cycle