Setting Prices
Pricing is the sentence you write about your work. Write it well, and the right customers agree with you. Write it poorly, and the wrong ones do.
Pricing is the bridge between what you do and what it is worth. The confusion is almost always in the bridge. The founders who get pricing right are the ones who stop thinking about it as arithmetic and start thinking about it as a sentence about how they see their own work.
In short
- • The three methods for pricing that respect the work and the buyer
- • Why underpricing is more expensive than overpricing
- • How to raise prices without losing customers
- • The pricing review that keeps you competitive
Start with the economics and the buyer
There is no single formula that produces the right price.
A sustainable price has to work for both sides of the transaction.
For the business, consider:
- direct delivery cost;
- capacity;
- overhead;
- target margin;
- payment costs;
- acquisition and support costs.
For the customer, consider:
- the problem being solved;
- the value of the outcome;
- alternatives;
- switching cost;
- risk;
- urgency;
- budget and buying process.
Cost can establish a floor. Customer value and alternatives help establish what the market may support. Neither alone determines the answer.
Define the value metric
Choose what the customer is actually paying for.
Possible metrics include:
- seats;
- transactions;
- usage;
- locations;
- projects;
- capacity;
- a defined service scope.
A good value metric should be understandable, connected to customer value, and economically sustainable to deliver.
Test a real price
Do not ask only what people think they would pay.
Present an actual offer and record:
- acceptance;
- rejection;
- negotiation;
- questions;
- requested scope changes;
- timing objections;
- alternatives mentioned.
A price that is accepted once is evidence about one transaction, not proof that the whole market will accept it.
Change one variable at a time where possible
If you change price, scope, positioning and sales process together, you may not know what changed the result.
Use a simple test record:
Hypothesis: what do we expect?
Offer: what exactly is being presented?
Customer: who is seeing it?
Result: what happened?
Interpretation: what might explain it?
Next test: what should change?
Do not confuse “cheap” with “easy to buy”
A lower price can reduce one barrier while creating another. It may signal lower quality, attract customers with poor fit, or make the economics of delivery unsustainable.
Likewise, a higher price is not automatically better positioning.
The useful question is whether the price makes the value, scope and economics credible to the customer and viable for the business.
Decision test
Before setting or changing a price:
- What customer problem are we pricing?
- What outcome is valuable?
- What alternatives does the customer have?
- What does delivery cost?
- What evidence do we have from real buying behaviour?
- What trade-off are we making?
- What would make us change the price?
Evidence boundary
Pricing research supports combining value, alternatives, willingness to pay and economics. It does not produce a universal “right price” or guarantee a particular conversion rate.
Take it into your work
Do something with what you just read.
Save it for later, mark the passage that matters, or open your SOE workspace and keep thinking.
Takeaways
What to carry forward
- → Price the outcome, not the hour.
- → The right price feels slightly uncomfortable to say.
- → Underpricing attracts the wrong customers.
- → Review prices every quarter.
Pricing is not arithmetic. It is a sentence about how you see your own work. Say it clearly, test it honestly, know your margin, and adjust it regularly. The founders who treat pricing as a strategic practice rather than a pricing event build more profitable businesses and keep better customers.