On Pricing (drafting)

Sean Horgan

Principles

Pricing should be based on the value to the customer, not cost

Prices should be clear, consistent, and coherent with the rest of your company’s portfolio

Comparables matter. Unless you are operating a monopoly or providing a truly unique solution, assume that your customers know the prices of the alternatives and the cost of the status quo.

Price differentiation is the key enabler of a durable business

Pricing communication shapes the customer’s perception of value

From

HBR on Pricing.PDF⁠

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References

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The Seven Principles of Pricing⁠

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Garry Tang hit the pricing nail on the head (11:30 below) we he said that there are only 3 price points in software:

$5/seat - Consumer

$500/seat - SMB

$5000/seat - Enterprise

There are plenty of circumstances where doesn’t hold, like government contracting and hardware infrastructure, but it’s important to embrace a simple frame like this before you convince yourself that you need more complexity that your customers will suffer through.

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Principles

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