Pricing Strategy Insights

Do You Need to Manage Costs? TLDR: Make sure to look at the average values! With the concerns and reality of rising prices, A lot of businesses and individuals are battling, An even more pressing concern of managing costs. I often see people using PRICE and COST interchangeably. And with all due respect to those people, this is wrong. I have said it on other occasions, and I will repeat it: Language matters when you are making decisions. Each of these terms represents something different. PRICE refers to what your consumers pay you Per unit of the goods or services you offer. COST refers to what you pay for obtaining resources From others to produce your goods or services. Three main types of COSTS to consider by a business: 1. Fixed Costs (FC): subscriptions, rent, electricity, etc. 2. Variable Costs (VC): wages, interest, raw materials, etc. 3. Total Costs (TC): sum of fixed and variable costs. There are also marginal costs, opportunity costs & sunk costs, But we will leave the discussion of those for the future. To manage costs and efficiency to get returns on costs, Focus mainly on the average values of FC, VC, and TC. Fixed costs are not dependent on quantity of goods --> Whether you produce 10, 20 or 50 units, FC is same. --> Thus, as production increases, Average FC decreases. Variable costs vary with the quantity of goods produced. --> Business needs to use more resources to produce more. --> Initially Average VC is higher, then falls, and then rises again. Total costs also vary with the quantity of goods produced. --> Sum of the fixed and variable costs so incorporates it all. --> Average TC is higher in the beginning and then falls. --> Over a long time, ATC and AVC are almost convergent. Most businesses produce at the point Where the ATC or the AVC is the lowest. Actionable Insights: 1. If PRICE of your good is lower than min. AVC: --> You're operating at a non-sustainable loss. --> Urgently change pricing or consider exiting. 2. If your PRICE is lower than min. ATC, but more than min. AVC: --> You're operating at a sustainable loss currently. --> Strategically addressing pricing is essential. 3. If your PRICE is higher than min. ATC: --> Check if you're producing a higher or lower quantity. --> You might be making profits but not efficiently. 4. Consider working with experts: --> Analyze your cost and average cost data closely. --> Analyze and adjust your pricing with data-led insights. Follow Dr. Kruti Lehenbauer & Analytics TX, LLC for #PostitStatistics #DataScience #Economics & #AI tips On how to manage and lead your SMB sustainably. P.S.: Which cost do you look at on your spreadsheets?

We reached $4M ARR, then cut pricing ~40% to prioritize retention over short term revenue. Pricing can separate a nice $5M biz and a breakout. If launching a product, here's the tactical way to set pricing, based on your goals: 1. Recognize that pricing strategy is VERY different depending on if you're VC backed or bootstrapped. VC backed can undercut competitors with subsidized low pricing, grab market share, then increase prices over time (see: Uber, Doordash). Bootstrapped companies have no such luxury: they need to make a profit on every customer from day 1 - you need the cash, yesterday. *this post focuses on finding right pricing in a bootstrapped environment* 2. First, figure out the lowest possible price you can breakeven at. Consider all costs involved from bringing on and servicing a customer - from sales and AM, to variable product costs. This is now your absolute minimum pricing. 3. Take 50 calls, get 10 customers, as fast as you can, at whatever cost you can, (above min. pricing). Your first 10 customers aren't about making money, they are about gathering data. Every call is an opportunity to triangulate what people are willing to pay. Try min. pricing, try 3x min. pricing. Try 2x min. pricing for month to month, but say that you can drop that by 30% for 3 month commit. Keep pushing up price until people tell you that is ridiculous. Triangulate towards a price people will pay. 4. Classify these calls by customer type. One type of business might think pricing is ridiculous, whereas another finds it cheap. Make sure you are not letting all of this data get mixed in together. Half of pricing discovery is figuring out who your core customer is. 5. Sign 3 month deals, not annuals (to start). Eventually, you want annuals. But at first, annuals are dangerous. You're looking for data on retention, and locking someone into an annual prevents you from gathering that data. Signing 3 month deals forces the conversation earlier.... are people getting value for the price? 6. Revise. Assuming you care about retention, take note of who is staying on. Be honest that you're trying to find a price that works for them. People like honesty and this will get you more information then beating around the bush. Ask "what pricing would make this a no brainer to commit for the next year?" 7. Get real about what you are prioritizing - short term revenue, or long term retention? There is no singular right answer to this. So many factors come in to play: your end game, how big your market is, how easy/hard it is to attract new customers, and much more. But understand that price/margin and customer retention are opposing forces. Be intentional about what you are prioritizing for. (note: this can change at different times in company lifecycle). In short: - Take 50 calls, throw out wildly diverse pricing to gather feedback - Sign 3 month deals to rapidly understand value to price/retention - Be intentional about what your pricing will drive (margin v NDR)

How to raise prices WITHOUT losing customers. Raising prices is inevitable for small businesses. Here’s how to do it right: 1. Research & validate - Benchmark your prices against competitors. Where are you different? - Ask your customers what they value most about your offering. - Define a subset of customers to test pricing with before rolling out. 2. Segment & strategize - Give new customers a higher price while phasing in your existing customers over time. - Offer multiple pricing tiers based on features or service levels or offer discounts for bundling multiple products. 3. Communicate transparently - Don’t try to hide it. Give customers lots of advance notice, and clearly explain the added value/improvements you’re making. - Highlight your unique aspects, especially with customer testimonials. 4. Monitor & adjust - Regularly collect feedback through surveys, anecdotes, and monitor & respond to online reviews. Adjust if necessary. - Keep an eye on early-indicator metrics (e.g. sales calls booked, website traffic, support ticket volume) so you can act early to address any dropoffs. — If you found value in this post, give it a comment / like / repost so more people see it. Thanks for reading. Follow Michael Girdley for more daily business content ✅

During my career I helped price 10+ SaaS products that have generated over $3B in revenues. Recently my CEO Adam Robinson and I discussed how to price our new B2B product. Here's a breakdown of our thinking: BACKGROUND: We are launching a new identity-resolution product that is arguably superior to other substitutes in the market. The market we operate in has organized itself into two tiers: High and lower priced solutions. Here’s a pricing wisdom that I have developed over time : 1. If you want to increase revenue incrementally, increase price  2. If you want to increase revenue exponentially, decrease price 3. If you want to dominate your space, give it away for free and charge later When pricing, it’s important to understand your motivation:   - Are you trying to capture more revenues? - Are you trying to compete more effectively? - Do you want to switch market segment or increase TAM? - Do you want to comfortably win or completely dominate the space? Once there’s clarity, it becomes easy to use pricing as a lever to navigate the business towards the desired outcome. We are fortunate to have a profitable business that’s generating $22M+ in ARR. This allows us to go slow on monetization. From our initial discussions, it was clear we needed to optimize our pricing and GTM for rapid market adoption and not short term revenues. Largest growth always happens at the latter end of the curve, but for that we need to have a bulk of the market already using us. We will try and get 250K+ domains (including free signups) in the next 2 years.  Once we decided we wanted to go freemium, it made sense to double down on self serve motion. This also gave us some direction to the kind of GTM team we want to build. We also knew backend data costs had to be fixed with zero marginal cost to support freemium pricing. To increase our likelihood of capturing a significant TAM, it only makes sense to decrease all friction to adoption - including pricing. Most of the competitors are charging on traffic volume. To change the game, we took volume out of the picture. Given we can provide this solution at no marginal cost, we will resolve unlimited traffic (fair usage) for the same price. We are instead charging on integrations. The lowest priced plan requires users to work with excel files. Whereas the other more expensive solutions provide additional integrations. We think disruption happens at the low end of an established market. So we have a laser sharp focus at the SMB/lower MM users to drive our signup numbers. We ended up with: Plan 1: Perpetually Free, but no download Plan 2: $295/mo, csv download, slack integration Plan 3: $495/mo, Sales Integrations Plan 4: $995/mo, Sales + Marketing Integrations (no annual deals, only M2M) Remember: Pricing is an iterative exercise. We will watch the impact of our initial assumptions and recalibrate.

Are discounts hurting your brand’s image, and performance? Before you start tossing around discounts just to get customers to buy, take a step back. Are you building a discount brand, or do you want to retain that premium image? I often see brands “train” their customers to only shop with them during heavy discount periods. This is NOT a winning strategy. Often times this dilutes margins and pulls revenue forward at the expense of predictable and stable 30/60/90 days sales. You also attract a different type of buyer (discount shopper), who usually has lower CLV and churns faster. Here’s how to get creative with your offers without slashing prices: 1. Test the Wording Instead of defaulting to percentage discounts, experiment with more strategic language in your offers. For example, if you’re a subscription business, try a "double hit" offer, where customers can bundle two subscriptions to save on shipping or receive a slight added value. This approach keeps the offer compelling without lowering your brand’s perceived value. Wording like “Double Your Order, Save on Shipping” gives the feel of an exclusive offer while still protecting margins. 2. Offer Freebies Instead For premium brands, offering a freebie can be far more powerful than offering discounts. At MANSSION, for example, free ring sizers are provided with each purchase, which adds value without devaluing the product. This approach makes customers feel they’re getting something special and unexpected. This tactic works especially well for building brand loyalty, as customers associate the “extra” with your brand’s generosity. 3. Escalate Offers for Retention Rather than immediately offering a discount to customers who haven’t repurchased, consider using a tiered incentive system. Start with a small offer, like free shipping or a minor add-on, and gradually escalate only if they remain inactive. This gives you a retention lever without conditioning customers to expect discounts right away. It also preserves the brand’s premium positioning, rewarding patience with stronger offers over time. 4. Focus on Value, Not Price Instead of simply lowering prices, focus on delivering additional value. Consider bundling products at a slightly reduced price, offering loyalty program perks, or providing exclusive early access to new products. The goal is to give customers a reason to keep buying from you without eroding your brand image. When value is defined by unique experiences or exclusive access, customers perceive your brand as generous and premium—not discounted. Key Takeaway: You don’t have to race to the bottom with discounts. A well-thought-out offer that preserves your brand’s integrity is far more powerful. Remember: Value > Price.

Enterprise pricing. Most founders don't have a game plan beyond throwing up a "Contact Sales" button on the site. When I was first starting out as the co-founder of WayUp at 23 years old, I remember making all the pricing mistakes in the playbook in the early days. A quick anecdote to show just how naive I was with pricing – When we signed our first enterprise customer (a Fortune 100), as a hiring platform, we had them pay us at the end of the month based on how many applicants they received in the prior 30 days. They paid us $2K in Jan, $4K in Feb, $3.2K in March. By April, they asked us, “Can you just charge us at a flat rate for the next year, and we’ll sign a 12 month contract?” At the time I thought — “Holy crap. They’re just gonna pay us upfront?” I thought I’d come up with an innovative new business model. Then I looked it up and realized: oh, that’s just SaaS 🤣 After 7+ years building WayUp and working with hundreds of founders now as an investor, here’s a few bits of Enterprise pricing advice I wish I’d gotten back in 2014: 1) In the early days, try to stick to a pricing model/framework that resembles how your customers are used to buying software. For example, my customers were used to paying LinkedIn per seat for a flat fee per year. 2) Do pricing discovery before you give a quote. It’s very normal to ask your customer about their budget. And on that note… I don’t always agree with the generic advice to keep raising your prices until you hear from prospects that it’s too high. In my experience that misses a key nuance: Enterprise pricing isn’t one-size-fits-all. Two enterprise companies can have different budgets and spending philosophies (think Lockheed Martin vs. famously frugal Amazon). 3) What I found was effective (but it only works for certain businesses) was to let the customer determine their own pricing. For example, I’d give a pricing calculator spreadsheet where prospects could manipulate certain cells based on what they wanted to buy, so they could see how the price would change based on the # of seats or modules they want, the discounts they’d get for longer contracts, etc. This way, I never felt like I was negotiating against a customer – instead, they were negotiating with themselves. (Leave a comment if you’ like for me to DM you a link to a sample pricing calculator spreadsheet!) 4) For flat fee subscription contracts, if your goal is to sign multi-year contracts, give the client 3 options, where they get a higher discount for a longer duration. 5) Is a client insisting on a free trial? Try signing them on for a 12 month contract where they can terminate for any reason within the first 2 months, and where they can pay on day 61. 6) I strongly advise companies against raising the price dramatically at renewal. Too many startups start low, only to 8X the price one year later, which turns customers off and loses their trust. These are just a few tips. Any pricing principles you had to learn the hard way?

As a product marketer, you've been tasked with updating pricing 😨 Here's your survival guide: First, accept this truth: Everyone will have an opinion. But opinions aren't strategy. Here's what actually works: 1️⃣ Put a system in place: → Empower a small team to act → Align on success metrics → Create a cadence for executive updates → Plan when other stakeholders will be involved 2️⃣ Inform the new model with research: → Talk to customers → Interview sales reps to get their take → Dig into customer usage data → Layer quantitative research for validation 3️⃣ Build your storyline - because every price needs a ‘why?’: → What problems are we really solving? → Which customers get the most value? → Where do we win most consistently? → What's our true differentiation? 3️⃣ The execution framework: → Map out your migration plan → Provide ample documentation to customers → Give a generous transition period → Involve stakeholders from Marketing, Sales, and CS 🚀 Pro tip: Use PricingSaaS → Competitor pricing database → Pricing page examples → Strategy frameworks and reports 👉 Remember: Sales will want it lower Product will want it simpler Finance will want it higher You need to find the truth in the middle. 🤝 Your job isn't to make everyone happy. Your job is to price for long-term growth. Save this 101 for next time you’re making a pricing decision 👇

Discounting is hurting your LTV more than you think (and a scary example). Many brands rely on discounts to acquire new customers or to patch up a lackluster conversion rate. But this discount hurts your LTV twice: 1.) You're losing immediate margin on the first purchase. 2.) You're probably acquiring a lower-quality customer. - trained to seek discounts in future purchase - often single category/product buyers (they just want the discounted items) Let's play this out w/ math: Full-price scenario AOV = $100 Discount Rate = 0% Expenses/COGS = $70 Orders/Customer = 1.5 LTV = ($100 - $70) * 1.5 = $60 Discount Scenario AOV = $100 Discount Rate = 25% Expenses/COGS = $70 Orders/Customer = 1.5 LTV = ($100 - $70 - $25 discount) * 1.5 = $10 (eek) Yikes, the LTV is very different. In the full-price scenario, you can have a break-even CAC of $60. However, if you use the same CAC target in the discount scenario you'll lose $50 per customer...and go broke. So should you avoid discounts? No, I'm not saying that. Every brand is different. Instead, do the math. Look at YOUR unit economics. Other considerations...  - higher margin brands have more opportunity to discount - if you have a lower CAC you can discount more too - look at creative discounts aside from direct $/% off (GWP, bundles, upgraded shipping, cash back on future purchases, etc.) - don't expect the same LTV out of all your customers. Segment them and treat them appropriately. - when you hit the bounds of what your economics support, pull back. Brands that thread the needle between acquisition and longterm profitability will win and grow. #marketinganalytics #ecommerce #uniteconomics #discountstrategy

Think raising your prices will scare clients away? What if the opposite is true? On the latest episode of Stop the Noise, I spoke with Per Sjofors, founder of Sjöfors & Partners and author of The Price Whisperer. With over 750 client engagements under his belt, Per has helped businesses double their growth rates and boost margins by as much as 40%. He joined me to break down one of the trickiest parts of consulting: pricing your services. Per believes pricing isn’t just numbers—it’s a message. And if your prices don’t reflect your value, your clients will notice. Here are a few highlights from our conversation: ➡️Stop Selling Hours Charging hourly invites comparisons and can even penalize you for being efficient. Per argues that value-based pricing shifts the focus from time to tangible results. ➡️Presentation Matters A strong proposal builds confidence. By the time you reveal your price, your client should already see the value. ➡️Anchor High Per’s "Best, Better, Good" framework sets expectations by showing your top-tier offer first. ➡️Test Your Pricing with Two Key Questions Ask 25 potential clients: > What price feels too low to trust? > What price feels too high to afford? The goal isn’t just to charge more—it’s to build trust and position yourself as a premium choice. Curious to dive deeper into these strategies? Listen to the full episode here: https://lnkd.in/gsH7aHnp There’s already too much noise about chasing clients with low fees. The real win? Owning your worth and showing clients why you’re worth it.

For many companies, business growth feels like a black box from a pricing standpoint. Yes, we see the aggregate numbers, but we rarely know why exactly we’re growing. Is it higher prices? Less discounting? More units sold? Different customer and product mix? Or are rising costs eating into margins? I just put together a short walkthrough of our Growth Drivers Analysis template, which tackles these questions by analyzing data at the customer-product level (where invoicing and sales activity happens). Here’s why it matters: 1. Pinpoint Margin Changes: In a high-inflation and high-tariff environment, knowing exactly which levers - price, volume, cost, or mix -drive your gross profit is mission-critical. 2. Surgical Actions: By isolating price vs. volume vs. mix, you can focus on profitable customers/products, address unnecessary discounting actions, reactivate lost business, or upsell products to existing customers. 3. Net Price Realization: Ever wonder why a 15% list price increase only has a 5% net price impact in reality? Our template shows you the effectiveness of your pricing strategy so you can make informed adjustments. If you want a deeper dive, check out the video walkthrough and Excel template I’ve shared below. It walks you through the critical tabs: - Net Revenue Growth Deep Dive (price impact, volume impact, new vs. lost business) - Gross Profit Deep Dive (cost integration to see margin growth drivers) - Net Price Realization (how much of your intended price increase % stuck) Curious to learn more? Download the workbook in the comments, and feel free to reach out with questions or feedback. As much as we can, let's make sure we’re all basing pricing decisions on meaningful insights, not guesses. #GrowthAnalysis #revenue_growth_analytics #FinancialAnalysis