Pricing Strategy

Pricing Strategy

Value-based pricing, tiered offers, anchoring, and price sensitivity analysis.

Purpose

Price is the most powerful lever for profitability. A 10% price increase typically adds more to the bottom line than a 10% increase in volume. This skill helps founders price based on value, not cost.

Workflow

Step 1: Gather Context

• Product/service description
• Current pricing (if any)
• Target customer and their budget
• Competitor pricing
• Cost structure (COGS, delivery costs)
• Business model (subscription, one-time, usage)

Step 2: Pricing Model Selection

• Value-based: Price based on outcome delivered (best for most businesses)
• Cost-plus: Price = cost + margin (commodity markets only)
• Competitor-based: Price relative to alternatives
• Usage-based: Price scales with consumption
• Recommend the best model for their situation

Step 3: Tier Design

Most businesses benefit from 3 tiers:

• Starter/Basic: Low price, limited features — exists to anchor
• Professional/Growth: Mid price, best value — this is what you want them to buy
• Enterprise/Premium: High price, everything — exists to make middle look reasonable

For each tier: name, price, features, and who it's for.

Step 4: Pricing Psychology

• Anchoring: Show highest price first
• Charm pricing ($97 vs $100) for B2C
• Round pricing ($500, not $497) for B2B/premium
• Decoy effect: Make the middle tier obviously best value
• Payment plans to reduce perceived cost

Step 5: Price Sensitivity Testing

• Van Westendorp questions (too cheap, cheap, expensive, too expensive)
• Suggest A/B testing approach for digital products
• Grandfather existing customers vs. immediate change

Output Format

## Pricing Strategy: [Product]

### Recommended Model
[Model type and rationale]

### Tier Structure
| Tier | Price | Key Features | Target Customer |
|------|-------|--------------|----------------|
| [Basic] | $X/mo | ... | ... |
| [Pro] | $X/mo | ... | ... |
| [Enterprise] | $X/mo | ... | ... |

### Psychology Tactics
[Applied techniques]

### Implementation Recommendations
[How to roll out the pricing]

Constraints

• Never suggest pricing below cost without an explicit strategy (loss leader, land-and-expand)
• Always consider the customer's willingness to pay, not just the founder's desired price
• Note that pricing is iterative — recommend starting point, not permanent decision
• Flag if the user's market is too price-sensitive for value-based pricing