Price Formation¶

Pricing - Reflection Guide

1 · Product & Strategy ⬇️​

• What single business goal must pricing accelerate right now?

• Why: Price crafted for adoption (freemium) can starve cash if runway is the real need.

• Is the product inherently sticky once adopted?

• Why: Sticky products recoup revenue via expansion; non-sticky products must charge earlier.

• Will we run product-led, sales-led, or hybrid GTM in the next 12 months?

• Why: Each motion sets different list-price and discount expectations.

• Does pricing reinforce our positioning (premium vs. disruptive)?

• Why: Price signals market segment louder than marketing copy.

2 · Customer & Value ⬇️​

• Who is the ideal customer profile and which budget line pays?

• Why: CIO budgets tolerate very different prices than hobbyist credit cards.

• What quantified outcome do we deliver (hours saved, \$ gained, risk avoided)?

• Why: Value-based pricing needs a credible ROI anchor.

• Have we run a real Willingness-To-Pay test?

• Why: A 1 % price lift ≈ 12 % profit boost in SaaS; don’t leave money on the table.

• Do different segments show different WTP?

• Why: Drives tiering or usage caps that match value delivered.

3 · Cost & Unit Economics ⬇️​

• What is our fully-loaded COGS per unit of the value metric?

• Why: AI / usage products must price to cost anchor to protect margin.

• What gross-margin floor will we defend (≥ 70 %)?

• Why: Ensures cash for R&D and GTM.

• How volatile are those costs over time?

• Why: Volatile costs argue for variable or hybrid pricing over flat subscriptions.

• 4 · Market & Competitive Context ⬇️​
  Which pricing models dominate our segment today?
  Why: Buyers anchor on familiar patterns; swimming upstream needs extra messaging.
  Where do we sit on the price spectrum vs. substitutes?
  Why: A premium can work—if extra value is obvious.
  Are rivals shifting to usage or hybrid because of AI costs?
  Why: Flat pricing may soon look outdated or risky.
  5 · Packaging & Metrics ⬇️​
  Which value metric best tracks customer success?
  Why: Tight linkage makes upsell feel natural, not punitive.
  Do we keep plan choices ≤ 5 blocks/tiers?
  Why: Too many options hurt conversion; 3–5 captures 95 % of demand.
  Do feature gates create or destroy value for our ICP?
  Why: One-plan models use usage caps; some markets expect classic feature tiers.
  6 · Expansion & Retention ⬇️​
  What built-in levers let customers spend more as they succeed?
  Why: Without them, Net Revenue Retention caps at 100 .
  Do we know the target attach-rate for add-ons (e.g., 5–10 %)?
  Why: Add-ons lift margin without complicating core pricing.
  Will annual pre-pay or credit packs smooth cash flow?
  Why: Improves capital efficiency and shortens CAC payback.
  7 · Operational Guard-Rails ⬇️​
  Can we meter usage in real-time and show it in-product?
  Why: Transparent meters reduce “bill-shock” churn.
  Do we offer budget caps or auto-throttles?
  Why: Gives buyers confidence to experiment with variable pricing.
  Is there a schedule for price experiments (≥ twice a year)?
  Why: Pricing is a product—iterate with data.
  8 · Changes x%x Messaging ⬇️​
  Can we state the price in one clear sentence a buyer gets in < 10 s?
  Why: Complexity kills conversion.
  Do we have a grandfather policy for existing users when prices rise?
  Why: Prevents public backlash and churn spikes.
  Is there a playbook for migrating beta/freemium users to paid?
  Why: Smooth upsell preserves goodwill and ARR.
  Do we keep a documented price-increase playbook (timing, notice, refunds/credits)?Why: Being proactive avoids support fire-drills and lost trust.