Principles
- Pricing should be based on the value to the customer, not cost
- Prices should be clear, consistent, and coherent with the rest of your company’s portfolio
- Comparables matter. Unless you are operating a monopoly or providing a truly unique solution, assume that your customers know the prices of the alternatives and the cost of the status quo.
- Price differentiation is the key enabler of a durable business
- Pricing communication shapes the customer’s perception of value
From HBR on Pricing.PDF
References
Garry Tang hit the pricing nail on the head (11:30 below) when he said that there are only 3 price points in software:
- $5/seat - Consumer
- $500/seat - SMB
- $5000/seat - Enterprise
There are plenty of circumstances where doesn’t hold, like government contracting and hardware infrastructure, but it’s important to embrace a simple frame like this before you convince yourself that you need more complexity that your customers will suffer through.
AI is disruptive enough to