01
Correlation to customer value
Does what customers pay rise with the value they receive?
The word “price” comes from the Latin pretium, meaning value or worth. It shares its root with “precious”. When you’re at a restaurant and get served a great plate, do you ask the waiter how much the tomatoes cost? No, you don’t. It’s the same with your customers: your costs are your kitchen. What matters to customers is the value they get out of your solution.
That’s why good pricing is pricing that maximizes its correlation with the value delivered. It doesn’t mean every company must switch to value-based pricing (oh no!). But it is a philosophy everyone in the company should align around: pricing is about value.
02
Packaging
Does your packaging resonate with customers’ pain?
What’s the point of good packaging? There are A LOT of reasons why good packaging is a deal-changer. But I’ll give you just one: good packaging turns any price negotiation into a value conversation.
When clients are shown only one offer, they have nothing to discuss but the price. When they see three packages, they think: where do I fit? That’s a value conversation. No matter what you sell or who’s selling it, giving customers a choice is always a good idea.
03
Price metric
Does the unit you charge for scale with value, support adoption and protect margin?
Your price metric is your fuel: it’s what allows you to scale with your customers. It’s the only variable in your profit equation that you have full control over. It’s a goldmine, really… But it takes some thinking to pick the right one.
Your price metric (per seat, per user, per credit) decides how your revenue grows. If it’s wrong, usage grows but revenue doesn’t, or buyers get scared of bills they cannot predict. With AI, your heaviest users can end up costing you more than they pay.
04
Pricing strategy and price level
Are you capturing enough of the value you create — consistently?
The Roman philosopher Seneca wrote: “If you do not know which port you are sailing to, no wind is favorable.” Well, in pricing, that’s super true. Pricing in tech is complex, and companies can get it wrong for dozens of reasons, but one is almost always at the root of all the others: the lack of a pricing strategy.
When founders, investors, Sales and Product are not aligned on one pricing strategy, they make inconsistent decisions that slow growth down. There are only three pricing strategies, and you have to choose one, because their trade-offs are incompatible.