Pricing strategy

Price touches every number in the business at once: revenue, margin, who buys and how fast growth can be. A price set once and never reviewed drifts away from the value delivered, either leaving money on the table or pushing out customers who would have paid. Treating price as a fixed fact rather than a decision is a common way a growing business caps its own margin.

• Start from the value a customer gets and what the alternative costs them, then check the cost floor.
• Test a change on new customers before touching existing ones.
• Review at least once a year, since costs, competitors and expectations move.
• Measure conversion and the value of deals that close together, not conversion alone.
• Give sales a simple structure and clear rules on discounting.

A price is a number. A pricing strategy is the reasoning behind it: who the price is for, what it is based on and how it is packaged. There are three common bases.

• Cost-plus: add a margin to the cost of delivery.
• Competitor-based: charge roughly what similar offers charge.
• Value-based: charge a share of the benefit the customer gets.

Structure is a separate choice. Common options are a flat fee, tiers, a price per user and usage-based pricing, where the bill follows consumption.

Say a design agency charges by the hour. Switching to three fixed-fee packages lets it charge for the outcome rather than the time, and clients can compare the options at a glance.

• Pricing from cost alone and ignoring what the customer would pay.
• Discounting by default to close deals faster.
• Never raising prices, even as the product improves.