Pricing Strategy

When to Use This Skill

Use this skill when you need to:

• Set pricing for a new product or service
• Evaluate and adjust existing pricing
• Design tiered or value-based pricing structures
• Analyze competitor pricing and position your offer

DO NOT use this skill for creating rate cards (use freelance-rate-card), commission structures, or cost analysis without pricing context. This is for strategic pricing decisions.

Core Principle

PRICE IS A SIGNAL — IT COMMUNICATES VALUE, POSITIONS YOUR BRAND, AND DETERMINES WHO YOUR CUSTOMER IS. NEVER SET PRICES BASED ON COST ALONE.

Phase 1: Pricing Inputs

Required Inputs

GATE: Do not proceed without the product, cost to deliver, and target customer.

Phase 2: Pricing Analysis

Cost-Plus Foundation

## Cost Analysis

| Component | Cost |
|-----------|------|
| Direct cost (materials, COGS, delivery) | $[X] |
| Time cost (hours x hourly rate) | $[X] |
| Overhead allocation | $[X] |
| **Total cost to deliver** | **$[X]** |

| Markup | Price | Margin |
|--------|-------|--------|
| 2x cost | $[X] | 50% |
| 3x cost | $[X] | 67% |
| 5x cost | $[X] | 80% |

Value-Based Pricing

## Value Analysis

| Value Element | Description | Estimated Value to Customer |
|--------------|-------------|---------------------------|
| Time saved | [Hours saved x customer's hourly value] | $[X] |
| Revenue generated | [Expected revenue impact] | $[X] |
| Cost avoided | [Costs eliminated by using product] | $[X] |
| Risk reduced | [Problems prevented] | $[X] |
| **Total value delivered** | | **$[X]** |

**Value-based price range:** 10-20% of total value delivered = $[X] - $[X]

Competitive Positioning

## Market Positioning

| Competitor | Price | Positioning |
|-----------|-------|-------------|
| [Comp 1] | $[X] | [Premium / Mid / Budget] |
| [Comp 2] | $[X] | [Premium / Mid / Budget] |
| [Comp 3] | $[X] | [Premium / Mid / Budget] |

**Your positioning options:**
- **Premium (above market):** Requires differentiation, social proof, premium experience
- **Market rate (competitive):** Safe but undifferentiated, compete on features
- **Below market (penetration):** Gains volume fast but hard to raise later, signals lower quality

Phase 3: Pricing Structure

Recommended Pricing Model

Choose and present the right structure:

Single Price: Best for: Simple products, clear value, low consideration purchases

Tiered Pricing (Good/Better/Best):

| Tier | Price | Includes | Target Buyer |
|------|-------|----------|-------------|
| [Basic] | $[X] | [Core features] | Price-sensitive buyers |
| [Pro] | $[X] | [Core + advanced] | Most buyers (anchor here) |
| [Premium] | $[X] | [Everything + extras] | Power users, enterprises |

Best for: SaaS, courses, service packages

Subscription: Monthly vs. annual pricing with discount for annual commitment (typically 15-20% off monthly)

Pay-per-result: Price tied to outcomes delivered — highest value capture, highest risk

Price Anchoring

• Present the highest tier first to anchor perception
• The middle tier should be the target — most customers choose it
• Include a decoy tier if needed to make the target tier look like the best value

Phase 4: Testing Plan

Price Sensitivity Testing

## Price Testing Plan

### A/B Test Structure
- Test 2-3 price points simultaneously
- Minimum 100 visitors per variant for significance
- Measure: Conversion rate, revenue per visitor, total revenue

### Price Points to Test
| Variant | Price | Hypothesis |
|---------|-------|-----------|
| A (current/low) | $[X] | Higher conversion, lower revenue per sale |
| B (target) | $[X] | Balanced conversion and revenue |
| C (premium) | $[X] | Lower conversion, higher revenue per sale |

### Signals to Watch
- Conversion rate drops >30% at higher price = price too high
- No conversion change at higher price = room to increase
- High refund rate at any price = value delivery problem, not pricing

Example: Online Course Pricing

Cost: $2,000 to create, $5/sale in delivery costs. Value: Students save 10 hours/week (worth $500/week at $50/hour). Competitors: $97-$497 range.

Recommendation: $197 single tier or $97/$197/$497 three-tier. Middle tier ($197) includes course + templates. Premium ($497) adds coaching calls. Price captures ~2% of monthly value delivered.

Anti-Patterns

• Cost-plus only pricing — your costs are irrelevant to the buyer. Price on value delivered, not cost incurred.
• Copying competitor prices — your differentiation should justify different pricing. Copy the model, not the number.
• Pricing too low out of fear — low prices attract price-sensitive buyers who churn fastest and complain most
• Too many tiers — 3 tiers maximum. More creates decision paralysis.
• Never testing — set a price, test it, adjust. Pricing is iterative, not permanent.

Recovery

• No competitor data: Price based on value analysis. Use the 10-20% of value delivered rule as a starting point.
• Commodity product (no differentiation): Compete on experience, bundling, or guarantees — not price. Or find a niche where you can differentiate.
• Price increase needed on existing product: Grandfather existing customers, raise for new customers. Communicate added value with the increase.
• Customers say it is too expensive: This is normal — 20-30% of prospects should find you too expensive. If nobody does, you are priced too low.