FerroxLabs Value-based pricing
When to load this mode
The user is about to pick a number — a subscription tier, a service rate, a product price, a course fee — and the price has not yet been pressure-tested. Load this whenever you hear "what should we charge," "is this too expensive," "should we drop the price," or "let's just match the competitor."
Procedure
Price is the price the buyer is willing to pay for the outcome, bounded below by cost and bounded above by the next-best alternative. Three steps.
1. Name the outcome the buyer is paying for. Not the feature, the outcome. Get back from Scout (or extract from the user's own notes) one verbatim sentence in the buyer's words: "I bought this so I could ___." If you can't fill that blank, stop. You have no price yet. Route to Scout.
2. Pull willingness-to-pay signal. Three sources, in order of reliability:
- Past purchases — what did this buyer (or buyers like them) pay for the closest alternative? Including the alternative of doing nothing for $0. Past money is the strongest signal.
- Trade-off answers — ask the user (or have Scout ask three customers): "If you had to pick between outcome A at $X or outcome A+B at $Y, which would you pick?" Paired comparison surfaces value perception that direct price questions hide.
- Range probe — ask "at what price would this feel too cheap to be serious?" and "at what price would you walk away?" The gap between those two answers is your operating band. (Van Westendorp's structure; don't name it.)
Direct "would you pay $X" questions are not signal. They return what the buyer thinks they should say, not what they would do.
3. Pick a strategy. With WTP evidence in hand, choose one:
- Premium — price above the willing majority. Use when the proof is strong, the alternative is obviously inferior, and the buyer is paying for status, certainty, or speed. Accept lower volume. Defend with proof, not pleading.
- Value-capture — price near the median willingness-to-pay. Default for most offers. The buyer feels they got fair value; you capture enough margin to invest in proof and reach.
- Penetration — price below the willing majority. Use when you need volume to learn, or when the upgrade ladder is clear and the entry price is a customer-acquisition cost. Avoid when the upgrade path is fuzzy — cheap stays cheap.
Write the strategy down in TEAM_MEMORY. Lock it for the launch. Re-pricing mid-launch teaches the market that the number was guessed.
Decision rules
- Price the outcome, not the asset. A course that gets the buyer their first paying client is priced against the value of a paying client, not against other courses.
- Three WTP signals beat one strong opinion. Anchor on the median, not the loudest voice.
- Cost-plus is a floor check, not a price. Calculate it. Confirm the price clears it. Then ignore it.
- The status-quo competitor is doing nothing. Price against that first; price against named competitors second.
- If the buyer's outcome is binary (got the job / didn't), price near the upper band. Binary outcomes carry binary value.
Anti-patterns
- Cost-plus pricing. "It costs me $40 to deliver, so I'll charge $80." That tells you nothing about what the buyer will pay. You may be leaving 5x on the table or pricing 2x above WTP.
- Competitor-match pricing. Anchors you to a market that may have priced wrong, and erases the differentiator you were supposed to charge for.
- Round-number defaulting. $97, $497, $997 by reflex. The buyer doesn't care about the 7. Price the outcome, then round.
- Asking buyers to predict their future behavior. "Would you pay $99 for this?" returns noise. "What did you pay the last time you tried to solve this?" returns signal.
- Re-pricing within a launch. Teaches every buyer who hesitated that hesitating works.
Before / after
Before: "Our course is similar to the $497 ones out there, so let's do $497."
After: "Three past buyers told Scout the outcome they wanted was a paying freelance client in 90 days. One of them paid $2,400 for a coach who couldn't deliver that. The other two had paid $0 and tried for six months. Value-capture range: $600–$900. Recommended: $797, with a 'first client or refund' guarantee. Premium tier with done-with-you coaching at $1,997 captures the buyer who already paid $2,400 once."