Deciding what to charge.
WHAT TO PRICE AGAINST
The value to the customer.
WHAT NOT TO PRICE AGAINST
Your costs Competitors alone What feels comfortable to ask
WHY COST-BASED PRICING FAILS
It bears no relation to what the product is worth, and it is almost always too low.
WHAT MOST NEW PRODUCTS DO
Charge too little.
WHAT THAT CAUSES
Insufficient revenue to support the customers you win Customers who do not value it No room for discounting
WHAT A PRICING METRIC IS
The thing charged for: users, usage, records, or a flat rate.
WHAT A GOOD METRIC DOES
Grows as the customer gets more value.
WHY THAT MATTERS
Revenue then grows with customer success rather than requiring new sales.
WHAT MAKES A BAD METRIC
One customers game One that punishes adoption One they cannot predict
WHY PREDICTABILITY MATTERS
Unpredictable bills produce cancellations, whatever the total.
WHAT TIERS SHOULD DO
Separate customers by what they need, not by arbitrary restriction.
HOW MANY TIERS
Three is usually enough.
WHAT TO PUT IN THE TOP TIER
What larger organisations require: control, security, support.
WHAT TO TEST
Raising prices for new customers, and observing.
WHAT TO PROTECT
Existing customers from sudden increases.
