# Pricing Strategy

> USE THIS SKILL when the user asks about pricing strategy, monetization design, pricing models, price optimization, willingness to pay, price sensitivity, pricing tiers, bundling strategy, or revenue model design. Trigger terms: "pricing", "price", "monetization", "willingness to pay", "price sensitivity", "Van Westendorp", "Gabor-Granger", "pricing tiers", "freemium", "bundling", "price point", "cost-plus", "value-based pricing", "pricing architecture", "price optimization", "how much to charge", "pricing model".

- Skill: `kaakati/pricing-strategy` (Agent Skill)
- Install (CLI): `npx skillmds@latest add kaakati/pricing-strategy`
- Raw SKILL.md: https://api.skillmd.com/api/skills/kaakati/pricing-strategy/raw
- Safety review: pending
- Works with: Claude Code, Claude.ai, OpenAI Codex
- Category: AI & ML
- Author: Kaakati (https://skillmd.com/u/kaakati)
- Updated: 2026-09-17
- Page: https://skillmd.com/skills/kaakati/pricing-strategy

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# Pricing Strategy & Monetization

Comprehensive pricing strategy using value-based, cost-plus, competitive, and dynamic models with sensitivity analysis, pricing architecture design, and revenue impact modeling.

---

## Required Inputs

| Input | Description | Required? |
|---|---|---|
| Product/service description | What is being priced | Yes |
| Target customer segments | Who are the buyers (ICP) | Yes |
| Value delivered | Measurable outcomes for customers | Yes |
| Cost structure | Variable costs, fixed costs, margins | Yes |
| Competitive pricing | Competitor price points and models | Yes |
| Current pricing (if any) | Existing prices and performance | If applicable |
| Revenue targets | Desired revenue and margin goals | Recommended |
| Sales motion | Self-serve, inside sales, enterprise | Recommended |
| Market positioning | Premium, mid-market, budget | Recommended |

---

## Execution Steps

### Step 1: Value Quantification

Before setting any price, quantify the value your product delivers to customers:

1. **Economic value analysis**:
   - Revenue generated or enabled for the customer
   - Costs saved (labor, time, materials, errors)
   - Risk reduced (compliance, downtime, churn)
   - Productivity improvement (throughput, speed)

2. **Value metric identification** — the unit that scales with value delivered:

   | Value Metric Type | Examples | Best For |
   |---|---|---|
   | Per user / seat | $X/user/month | Collaboration tools, productivity |
   | Per usage / consumption | $X/API call, $X/GB | Infrastructure, platforms |
   | Per outcome | $X/transaction, % of savings | Performance-based, fintech |
   | Per asset / resource | $X/project, $X/property | Management tools, vertical SaaS |
   | Flat rate | $X/month | Simple products, SMB |

3. **Value-to-price ratio**: Best practice is to capture 10-25% of the value delivered. Calculate:
   ```
   Maximum defensible price = Customer's economic value gained × Value capture ratio (10-25%)
   ```

### Step 2: Cost-Plus Floor

Establish the minimum viable price:

| Cost Component | Per Unit Cost | Notes |
|---|---|---|
| Direct COGS | $[X] | Hosting, third-party APIs, materials |
| Customer acquisition (CAC) | $[X] | Amortized over expected lifetime |
| Onboarding / implementation | $[X] | Support, training, professional services |
| Ongoing support | $[X] | Per-customer support cost |
| **Total per-customer cost** | **$[X]** | |
| Target gross margin | [X]% | |
| **Cost-plus floor price** | **$[X]** | |

**Rule**: Never price below cost-plus floor unless executing a deliberate land-and-expand or market-share strategy with funded runway.

### Step 3: Competitive Benchmarking

Map the competitive pricing landscape:

| Competitor | Pricing Model | Entry Price | Mid-Tier | Enterprise | Value Metric |
|---|---|---|---|---|---|
| [Comp 1] | [Model] | $[X]/mo | $[X]/mo | $[X]/mo | [Metric] |
| [Comp 2] | [Model] | $[X]/mo | $[X]/mo | $[X]/mo | [Metric] |
| [Comp 3] | [Model] | $[X]/mo | $[X]/mo | $[X]/mo | [Metric] |
| [Comp 4] | [Model] | $[X]/mo | $[X]/mo | $[X]/mo | [Metric] |

**Competitive price positioning options**:
- **Premium** (>20% above market): Requires demonstrable differentiation
- **Parity** (within +/-10% of market): Compete on value, not price
- **Penetration** (<20% below market): Buy market share, margin risk
- **Skim** (highest possible): First-mover, unique capability

### Step 4: Price Sensitivity Analysis

Apply structured methods to find optimal price points:

**Method A: Van Westendorp Price Sensitivity Meter**

Survey customers with four questions:
1. At what price would this be **so cheap** you'd question its quality? (Too Cheap)
2. At what price would this be a **bargain** — a great buy? (Cheap/Good Value)
3. At what price would this start to feel **expensive** but you'd still consider it? (Expensive/High)
4. At what price would this be **too expensive** to consider? (Too Expensive)

**Interpretation of intersections**:

| Intersection | Name | Meaning |
|---|---|---|
| Too Cheap ∩ Expensive | Point of Marginal Cheapness (PMC) | Floor of acceptable range |
| Cheap ∩ Too Expensive | Point of Marginal Expensiveness (PME) | Ceiling of acceptable range |
| Too Cheap ∩ Too Expensive | Optimal Price Point (OPP) | Minimum resistance |
| Cheap ∩ Expensive | Indifference Price Point (IDP) | Market norm |

**Acceptable price range**: PMC to PME

**Method B: Gabor-Granger Price Ladder**

Test specific price points sequentially:
1. Start at a mid-range price: "Would you buy this at $X?" (Yes/No)
2. If yes → increase price; if no → decrease price
3. Map the demand curve: price vs. purchase probability
4. Calculate revenue-maximizing price: Price × Purchase probability

| Price Point | % Would Buy | Revenue Index (Price × %) |
|---|---|---|
| $[Low] | [X]% | [X] |
| $[Mid-Low] | [X]% | [X] |
| $[Mid] | [X]% | [X] |
| $[Mid-High] | [X]% | [X] |
| $[High] | [X]% | [X] |

**Revenue-maximizing price**: $[X] (highest Revenue Index)

### Step 5: Pricing Architecture Design

Design the tier structure:

**Good-Better-Best framework**:

| Element | Starter / Good | Professional / Better | Enterprise / Best |
|---|---|---|---|
| **Target segment** | [Segment] | [Segment] | [Segment] |
| **Price** | $[X]/mo | $[X]/mo | Custom |
| **Value metric** | [X units included] | [X units included] | Unlimited |
| **Core features** | [Feature set] | [Everything in Starter +] | [Everything in Pro +] |
| **Differentiating features** | — | [Key upgrades] | [Premium features] |
| **Support level** | Self-serve / email | Priority / chat | Dedicated CSM / SLA |
| **Target conversion** | [X]% of signups | [X]% of customers | [X]% of revenue |

**Architecture design rules**:
1. **Starter tier** anchors value — must deliver enough value that customers see the product works
2. **Professional tier** should be the "hero" tier — most customers land here (60-70%)
3. **Enterprise tier** captures maximum value from large customers — never cap upside
4. **Feature fences** between tiers must map to genuine segment differences, not arbitrary gates
5. **No more than 3-4 tiers** — cognitive overload kills conversion

**Add-on and bundle strategy**:

| Add-on | Price | Target Attach Rate | Revenue Impact |
|---|---|---|---|
| [Add-on 1] | $[X]/mo | [X]% | $[X] incremental ARPU |
| [Add-on 2] | $[X]/mo | [X]% | $[X] incremental ARPU |
| [Bundle: Add-on 1+2] | $[X]/mo (X% discount) | [X]% | $[X] incremental ARPU |

### Step 6: Revenue Impact Modeling

Compare at least 3 pricing models side-by-side:

**Model comparison**:

| Metric | Model A: [Name] | Model B: [Name] | Model C: [Name] |
|---|---|---|---|
| **Pricing model** | [e.g., Per seat] | [e.g., Usage-based] | [e.g., Tiered flat rate] |
| **Entry price** | $[X]/mo | $[X]/mo | $[X]/mo |
| **Average ACV** | $[X] | $[X] | $[X] |
| **Gross margin** | [X]% | [X]% | [X]% |
| **Conversion rate** | [X]% | [X]% | [X]% |
| **Net revenue retention** | [X]% | [X]% | [X]% |
| **Year 1 revenue** | $[X] | $[X] | $[X] |
| **Year 3 revenue** | $[X] | $[X] | $[X] |
| **CAC payback** | [X] months | [X] months | [X] months |
| **LTV:CAC** | [X]:1 | [X]:1 | [X]:1 |

**Revenue projection by model (5-year)**:

| Year | Model A | Model B | Model C |
|---|---|---|---|
| Year 1 | $[X] | $[X] | $[X] |
| Year 2 | $[X] | $[X] | $[X] |
| Year 3 | $[X] | $[X] | $[X] |
| Year 4 | $[X] | $[X] | $[X] |
| Year 5 | $[X] | $[X] | $[X] |
| **5-Year Total** | **$[X]** | **$[X]** | **$[X]** |

**Recommendation**: [Model X] because [specific rationale tied to strategy, customer behavior, and economics]

### Step 7: Price Implementation Plan

| Element | Detail |
|---|---|
| Launch price vs. steady-state price | [Introductory pricing strategy] |
| Grandfathering policy | [How existing customers are handled] |
| Discounting policy | [Max discount %, approval authority by tier] |
| Price increase cadence | [Annual? With notice period?] |
| Contract terms | [Monthly/annual, commitment discounts] |
| Free tier / trial strategy | [Duration, limitations, conversion expectations] |

---

## Output Template

### Pricing Strategy: [Product/Service]

**Date**: [Date] | **Prepared for**: [Client/Project]

#### 1. Value Quantification

| Customer Segment | Economic Value Delivered (Annual) | Value Capture Target (10-25%) | Max Defensible Price |
|---|---|---|---|
| [Segment 1] | $[X] | [X]% | $[X]/year |
| [Segment 2] | $[X] | [X]% | $[X]/year |
| [Segment 3] | $[X] | [X]% | $[X]/year |

**Primary value metric**: [Metric] — chosen because [rationale]

#### 2. Price Boundaries

| Boundary | Price | Basis |
|---|---|---|
| **Cost-plus floor** | $[X]/mo | Fully loaded cost + target margin |
| **Competitive reference** | $[X]-$[X]/mo | Market range |
| **Value ceiling** | $[X]/mo | 10-25% of value delivered |
| **Optimal range** | **$[X]-$[X]/mo** | Intersection of all three |

#### 3. Price Sensitivity Results

**Van Westendorp range**: $[PMC] - $[PME] | **Optimal**: $[OPP]
**Gabor-Granger revenue-maximizing price**: $[X]

#### 4. Recommended Pricing Architecture

| | Starter | Professional | Enterprise |
|---|---|---|---|
| Price | $[X]/mo | $[X]/mo | Custom |
| Target segment | [Segment] | [Segment] | [Segment] |
| Key features | [Features] | [Features] | [Features] |
| Value metric | [X units] | [X units] | Unlimited |
| Expected mix | [X]% of customers | [X]% of customers | [X]% of customers |
| Revenue mix | [X]% of revenue | [X]% of revenue | [X]% of revenue |

#### 5. Revenue Impact: Model Comparison

*(See Step 6 tables above — include all three models with 5-year projections)*

**Recommended model**: [Model] | **Rationale**: [Why this model wins]

#### 6. Implementation Plan

| Action | Timeline | Owner | Dependencies |
|---|---|---|---|
| [Action 1] | [Date] | [Role] | [Dependencies] |
| [Action 2] | [Date] | [Role] | [Dependencies] |
| [Action 3] | [Date] | [Role] | [Dependencies] |

---

## Quality Checks

- [ ] Value quantification uses customer economic outcomes, not internal cost assumptions
- [ ] Cost-plus floor is calculated with fully loaded costs (COGS + CAC + support + onboarding)
- [ ] Competitive benchmarking includes at least 3 direct competitors with actual price points
- [ ] Price sensitivity uses at least one structured method (Van Westendorp or Gabor-Granger)
- [ ] Pricing architecture has no more than 4 tiers, each with a clear target segment
- [ ] Feature fences between tiers map to real segment differences, not arbitrary limits
- [ ] At least 3 pricing models are compared with 5-year revenue projections
- [ ] Revenue model includes conversion rates, churn, and expansion assumptions
- [ ] LTV:CAC ratio exceeds 3:1 under recommended pricing; if not, the gap is addressed
- [ ] Discounting policy sets maximum discount and approval authority
- [ ] Grandfathering policy for existing customers is specified
- [ ] Price implementation timeline has specific actions and owners
- [ ] Sensitivity analysis shows revenue impact of +/-20% price change