314 lines
10 KiB
Markdown
314 lines
10 KiB
Markdown
---
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name: saas-pricing-strategy
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description: Advises on SaaS pricing strategy using Daniel Priestley's oversubscription principles and Patrick Campbell's value-based framework. Use when defining pricing tiers, selecting value metrics, positioning against competitors, or creating pricing page copy for any SaaS product.
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---
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# SaaS Pricing Strategy
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Apply proven pricing frameworks from Daniel Priestley (demand generation) and Patrick Campbell (value-based pricing) to optimize SaaS pricing strategy.
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## When to Use This Skill
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- Defining or revising pricing tiers
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- Selecting value metrics (per-seat, usage-based, flat-rate, hybrid)
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- Competitive positioning and market analysis
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- Writing pricing page copy
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- Planning pricing experiments or A/B tests
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- Evaluating pricing model changes
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## Core Pricing Philosophy
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### Daniel Priestley's Oversubscription Principle
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#### Demand > Supply = Pricing Power
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DO NOT compete on price. Compete on demand generation.
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Key tenets:
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- Transparent capacity constraints create urgency
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- Waiting lists signal value and scarcity
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- Price reflects perceived value, not just costs
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- Market positioning matters more than feature comparison
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### Patrick Campbell's Value-Based Framework
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#### Price on value delivered, not cost incurred
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Key principles:
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1. **Value metric alignment**: What you charge for should match what customers value
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2. **Buyer persona intimacy**: Different segments have different willingness to pay
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3. **Continuous iteration**: Pricing is ongoing optimization, not one-time decision
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4. **3-tier sweet spot**: Fewer tiers = analysis paralysis, more tiers = choice overload
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## Value Metric Selection
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### Common Value Metrics
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**Per-Seat (Per-User)**
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- Best for: Collaboration tools, team software, platforms where value scales with team size
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- Pros: Predictable, simple, aligns with organizational growth
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- Cons: Can discourage adding users, ceiling effect for small teams
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**Usage-Based (Consumption)**
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- Best for: Infrastructure, APIs, data processing, services with variable usage
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- Pros: Fair pricing ("pay for what you use"), no ceiling on revenue
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- Cons: Unpredictable billing, complex to explain, requires usage tracking
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**Flat-Rate (All-You-Can-Eat)**
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- Best for: Simple products, low variance in usage, commoditized markets
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- Pros: Simplest to communicate, no metering overhead
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- Cons: Leaves money on table with power users, doesn't scale with value
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**Feature-Based (Good-Better-Best)**
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- Best for: Products with clear feature differentiation, tiered capabilities
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- Pros: Upgrade path is clear, captures different willingness to pay
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- Cons: Feature bloat temptation, can feel arbitrary
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**Hybrid (Combination)**
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- Best for: Complex products where multiple dimensions drive value
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- Pros: Captures more value, serves diverse segments
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- Cons: More complex to communicate and implement
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### Decision Framework for Value Metric
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Ask these questions:
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1. What metric correlates most strongly with customer value received?
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2. What's simple enough for customers to predict their costs?
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3. What aligns incentives (not penalizing desired behavior)?
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4. What grows naturally as customer success grows?
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5. What can you reliably measure and bill for?
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## Tiered Pricing Structure
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### Optimal Tier Count
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**3-4 tiers is ideal**
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- 2 tiers: Not enough choice, hard to capture variance
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- 3-4 tiers: Sweet spot for conversion
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- 5+ tiers: Analysis paralysis, decision fatigue
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### Tier Differentiation Strategies
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**Capacity Limits** (quantity-based)
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- Users, seats, projects, API calls, storage, transactions
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- Example: "Up to 5 users" vs "Up to 25 users"
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**Feature Access** (capability-based)
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- Advanced features, integrations, customization, priority support
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- Example: "Basic reports" vs "Custom dashboards + API access"
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**Service Level** (support-based)
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- Response time, dedicated support, onboarding, account management
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- Example: "Email support" vs "24/7 phone + dedicated CSM"
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**Usage Rights** (commercial terms)
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- Commercial use, white-labeling, resale rights, SLA guarantees
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- Example: "Personal use" vs "Commercial use + SLA"
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### Pricing Tier Psychology
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**Anchor with highest price**: Show Enterprise tier first or prominently to make mid-tier seem reasonable
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**Highlight recommended tier**: Use "Most Popular" or "Best Value" badge on target tier (usually middle)
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**Price gaps should increase**: $30 → $60 → $120 feels better than $30 → $50 → $70
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**Round numbers for simplicity**: $99/mo feels gimmicky for B2B; use $100/mo
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## Pricing Page Best Practices
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### Page Structure
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1. **Lead with value, not features**
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- Wrong: "Unlimited clients, 5GB storage, custom fields"
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- Right: "Save 10 hours per week on reporting"
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2. **Show annual savings option**
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- Offer 2 months free for annual billing (17% discount)
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- Improves cash flow and reduces churn
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3. **Transparent tier comparison**
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- Feature comparison table with clear differentiators
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- Use checkmarks, not excessive text
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- Highlight recommended tier
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4. **Social proof by tier**
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- Include customer counts, testimonials, use case examples per tier
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- "Perfect for teams of 5-10" or "Used by 500+ companies like yours"
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5. **Remove friction**
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- Free trial (14-30 days)
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- No credit card required for trial (increases signups)
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- Easy upgrade/downgrade path
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- Money-back guarantee if appropriate
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### Copy Framework
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**Headline**: Focus on outcome transformation
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- Good: "Close deals faster with intelligent CRM"
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- Bad: "Affordable CRM software"
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**Subhead**: Address primary objection
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- "Simple enough to start today. Powerful enough to scale with you."
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**CTA Language**:
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- Entry tier: "Start Free Trial"
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- Mid tier: "Start Free Trial" or "Get Started"
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- Top tier: "Start Free Trial" or "Schedule Demo"
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- Enterprise: "Contact Sales" or "Let's Talk"
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### Priestley-Aligned Demand Tactics
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**Capacity Signaling**:
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- "We're currently onboarding X new customers per month"
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- "Join X+ companies already using [Product]"
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- "Limited spots available for [special program]"
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**Demand Indicators**:
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- Show number of customers/users
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- Display recent signups (with permission)
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- Highlight waitlist count or assessment completions
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## Competitive Positioning
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### Market Research Checklist
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Before setting prices, research:
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1. **Direct competitors**: What do they charge? How do they tier?
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2. **Adjacent solutions**: What alternatives exist? (spreadsheets, consultants, etc.)
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3. **Customer budget**: What's typical spend for this category?
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4. **Switching costs**: How hard is it to leave current solution?
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5. **Perceived value gap**: How much better are you, quantifiably?
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### Positioning Strategies
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**Price leadership** (lowest price)
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- Only if cost advantage is sustainable
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- Race to bottom risk
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- Attracts price-sensitive, high-churn customers
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**Value leadership** (best value)
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- Sweet spot for most SaaS
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- Middle-market pricing with superior product/service
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- "We're not the cheapest, but we're worth it"
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**Premium positioning** (highest price)
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- Requires defensible differentiation
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- Attracts best customers, lower churn
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- "You get what you pay for"
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## Pricing Experiments & Iteration
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### What to Test
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1. **Tier names**: Functional vs. aspirational (Starter vs. Essential)
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2. **Anchor pricing**: Show Enterprise price to make Professional seem reasonable
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3. **Feature bundling**: Which features drive upgrades?
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4. **Annual vs. monthly default**: Does showing annual first increase LTV?
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5. **Trial length**: 14 days vs. 30 days conversion rates
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6. **CTA copy**: "Start Free Trial" vs. "Get Started Free"
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### Metrics to Track
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- **Conversion rate by tier**: Which tier converts best from trial?
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- **Time to upgrade**: How long before customers outgrow their tier?
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- **Churn by tier**: Do certain tiers retain better?
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- **Revenue per customer by tier**: LTV analysis
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- **Failed payment recovery rate**: Billing issue resolution
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- **Price sensitivity**: At what price point do signups drop?
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### Iteration Cadence
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- Review pricing metrics: Monthly
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- Minor adjustments (copy, positioning): Quarterly
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- Major structural changes (tiers, value metric): Annually
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- Always communicate changes in advance and grandfather existing customers when appropriate
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## Common Pitfalls to Avoid
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❌ **Competing on price alone**: Race to bottom, attracts worst customers
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✓ **Compete on demand and positioning**: Create scarcity, demonstrate value
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❌ **Too many tiers**: Analysis paralysis kills conversions
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✓ **3-4 tiers maximum**: Clear upgrade path, easy decision
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❌ **Grandfathering forever**: Prevents necessary price increases
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✓ **Communicate value, migrate gradually**: Give notice, explain benefits
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❌ **Feature-based differentiation only**: Customers don't buy features
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✓ **Outcome-based positioning**: "Save X hours/week" or "Increase revenue by Y%"
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❌ **Hiding pricing**: "Contact us" for all tiers reduces trust
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✓ **Transparent pricing**: Builds trust, qualifies leads naturally
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❌ **Set and forget**: Pricing is not a one-time decision
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✓ **Continuous optimization**: Treat pricing like product development
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## Decision Framework
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When evaluating pricing changes, ask:
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1. **Does this align with customer value perception?** (Campbell principle)
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2. **Does this create healthy demand/supply tension?** (Priestley principle)
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3. **Is it simple to understand and predict?** (Complexity kills conversion)
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4. **Does it scale with customer success?** (Value metric alignment)
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5. **Can we test it without disrupting existing customers?** (Iteration safety)
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If yes to all five, proceed with experiment. If no to any, revisit approach.
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## Workflow
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When asked to help with pricing:
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1. **Understand the context**
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- What does the product do?
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- Who are the customers?
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- What competitors exist and how do they price?
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- What constraints exist (market, budget, positioning)?
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2. **Apply the frameworks**
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- Recommend value metric using decision framework
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- Suggest tier structure (3-4 tiers)
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- Position against competition using Priestley's demand principles
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- Apply Campbell's value-based approach
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3. **Deliverable options**
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- Pricing strategy document
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- Pricing page copy
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- Competitive analysis
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- A/B test plan
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- Pricing tier structure with rationale
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4. **Next steps**
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- Set up tracking and metrics
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- Plan communication strategy
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- Schedule quarterly pricing review
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