How do I price?

Pricing is not a single formula. A useful price has to work for three things at once: the value the buyer expects, the economics of delivering the work, and the alternatives available to the buyer.

That is why the better question is not "What should I charge?" It is:

What outcome is the buyer paying for, what does that outcome plausibly mean to them, and what price can the business sustainably deliver at?

Value-based pricing can be useful because it starts with the customer's perceived economic value rather than treating delivery cost as the whole basis for price. Research on B2B pricing also shows that value-based pricing works better when a business can quantify value and understand customer price sensitivity. It is not a universal replacement for cost or competitive information. Roll & Geerties (2025) and Hinterhuber (2004)

Before choosing a number, define what the buyer is actually purchasing.

A service can be described at three levels:

• Deliverable: what you physically produce.
• Outcome: what changes because the deliverable exists.
• Economic consequence: what that change may be worth to the buyer.

For example, a consultant may deliver a sales-process redesign. The outcome might be a shorter sales cycle or better qualification. The economic consequence could be more productive selling time or fewer wasted opportunities.

Do not assume that the economic consequence is guaranteed. Separate the outcome you control from the business result that depends on the customer, market and execution.

That distinction prevents one of the most common pricing mistakes: promising a financial result simply because the service is intended to influence it.

You still need to know what the work costs you.

Calculate:

• direct delivery cost
• contractor or employee time
• software and operating costs
• sales and acquisition cost
• overhead allocation
• payment and transaction costs
• expected rework
• taxes and other applicable obligations
• the margin required for the business to remain healthy

Cost-based pricing is not inherently incompatible with value-based pricing. Academic research on B2B pricing has specifically found that companies can use cost-plus mechanics while still making value-oriented pricing decisions. Guerreiro & Amaral (2018)

The useful distinction is this:

Cost helps you understand whether a price is sustainable. It does not, by itself, tell you what the buyer should pay.

Value is easier to price when you can make it concrete.

Ask:

1. What problem is being removed?
2. How frequently does the problem occur?
3. What does it currently cost in money, time, risk or missed opportunity?
4. What changes if the problem is solved?
5. How confident are we that the proposed work will create that change?
6. What alternatives does the buyer have?

If a service is expected to save a team 200 hours a year, the value conversation is different from a service that mainly improves presentation quality.

But do not turn an estimate into a guarantee. A forecast is an input into pricing, not proof that the buyer will receive a particular return.

Competitor prices can tell you how the market is structured. They cannot tell you exactly what your own price should be.

A competitor may have:

• different delivery costs
• a different customer segment
• different positioning
• different capacity
• different margins
• different retention economics
• a different level of service
• a deliberate market-entry strategy

Use competitor information to understand the range and the buyer's alternatives. Then explain why your offer belongs where you are placing it.

If the buyer sees no meaningful difference between your offer and a cheaper alternative, the problem may be positioning, scope or proof rather than arithmetic.

Instead of searching for one magical number, establish a pricing band.

The lowest price that still makes the engagement economically sensible.

The price you would like to achieve for the normal version of the offer.

A higher price justified by additional value, urgency, complexity, risk reduction or scope.

This gives you room to negotiate without improvising your economics in the meeting.

Your reservation point should also be explicit. In negotiation terms, that is the point below which accepting the deal is worse than pursuing your alternative. Harvard's Program on Negotiation recommends considering your target, reservation point and the likely bargaining zone before making an opening offer. Harvard Program on Negotiation, first-offer and anchoring guidance

Value-based pricing is often described as if the seller can simply discover the customer's maximum willingness to pay.

Real businesses are messier.

Customer price sensitivity varies. Competitive alternatives matter. The buyer may not know the value in advance. Different customers can receive different economic value from the same service.

Recent B2B research found that value quantification capability and sales-force negotiation capability affect the relationship between value-based pricing and profitability, while customer price sensitivity can weaken the effect. [Roll & Geerties (2025), Journal of Revenue and Pricing Management](https://doi.org/10.

Cost-plus can be sensible when:

• the buyer requires a transparent cost basis
• the scope is standardized
• the contract has a defined cost structure
• the market is highly competitive
• the buyer has a fixed budget
• regulatory or procurement rules require particular pricing mechanics
• the seller needs a simple repeatable quoting method

The important question is not whether cost-plus is "bad." It is whether the pricing method matches the commercial situation.

Hourly pricing can be useful when the amount of work is genuinely uncertain and the uncertainty belongs with the buyer.

But a fixed price can make more sense when:

• the scope can be defined
• the buyer is purchasing an outcome or deliverable
• your process is repeatable
• you have enough experience to estimate effort
• the customer values budget certainty

A fixed price also means you carry more delivery risk. Build that risk into the scope, assumptions, change-control process and price rather than pretending uncertainty does not exist.

The first number in a negotiation can influence the discussion that follows. Research on anchoring shows that an opening offer can become a reference point, particularly when the bargaining range is uncertain. But anchoring is not a substitute for knowing the market or the bargaining zone. An aggressive number that has no credible basis can damage the negotiation. Harvard Program on Negotiation, first-offer and anchoring guidance

Before making an opening price, know:

• your target
• your reservation point
• your alternatives
• the likely buyer alternatives
• the scope included
• the evidence supporting the value
• the conditions under which you would change the offer

Precision can also affect negotiation. Research summarized by Harvard's Program on Negotiation reports that precise first offers can influence counteroffers, although the effect depends on context and the other party's knowledge. Harvard Program on Negotiation, anchoring guidance

The practical lesson is not "always anchor high."

It is:

Do not put a number on the table that you cannot explain.

Research has found that the way price digits are processed can affect consumer responses. For example, a 2007 Journal of Consumer Research study found a right-digit effect in comparisons of regular and sale prices. Other research has examined left-digit effects and price endings in consumer settings. Coulter & Coulter (2007), Journal of Consumer Research

These effects are context-dependent and are much smaller strategic levers than product value, positioning, scope, buyer economics and willingness to pay.

For a B2B founder, changing 5,000 to 4,900 is rarely a substitute for explaining why the offer is worth buying.

You do not need to guess forever.

Create a simple pricing-learning loop:

Hypothesis → Offer → Price → Buyer response → Outcome → Record → Adjust

Track:

• who received the offer
• customer segment
• problem being solved
• price
• scope
• whether the buyer had alternatives
• accepted / negotiated / rejected
• stated reason
• time to decision
• delivery economics after the sale

Do not change price after every rejection. A single rejection can mean the buyer lacked budget, the timing was wrong, the scope was unclear, the buyer did not trust the provider, or the offer was not valuable enough.

Look for patterns.

Before sending the next proposal, write down:

1. Buyer problem What expensive, urgent or important problem are they trying to solve?

2. Expected value What measurable or meaningful improvement could the work create?

3. Evidence What supports that estimate? What remains uncertain?

4. Alternatives What could the buyer do instead?

5. Delivery economics What does the work actually cost you?

6. Pricing band What are your floor, target and stretch prices?

7. Scope What is included, excluded and change-controlled?

8. Negotiation position What is your target and reservation point?

9. Learning plan What will you record after the conversation?

This is enough to make pricing substantially more deliberate without pretending there is a universal formula.

Avoid:

• copying a competitor's price without understanding the difference
• pricing only from hours when the buyer is purchasing a defined outcome
• claiming a guaranteed financial return you cannot control
• treating cost as proof of value
• treating value estimates as facts
• changing prices because of one unusual customer
• using an aggressive anchor you cannot defend
• relying on .99 or other psychological pricing tricks to compensate for weak positioning
• hiding scope ambiguity inside a fixed price
• negotiating without knowing your reservation point

If you are unsure what to charge, do not start by asking what other people charge.

Start with the buyer's problem, estimate the value conservatively, understand your own delivery economics, map the alternatives, and establish a floor, target and stretch price.

Then test the offer and record what happens.

The goal is not to find the highest number a buyer might tolerate. It is to build a pricing system that is economically sustainable, understandable to buyers, defensible in negotiation and capable of improving as you learn.

This article replaces unsupported statistics and unattributed claims in the earlier draft with a narrower evidence base. It draws primarily on peer-reviewed pricing research and established negotiation research, while using practitioner sources only for explanatory context.

Key sources include:

• Roll & Geerties, "Unlocking value-based pricing: the moderating roles of pricing capabilities and contingency factors in B2B markets: an empirical approach," Journal of Revenue and Pricing Management (2025). Roll & Geerties (2025), Journal of Revenue and Pricing Management
• Hinterhuber, "Towards value-based pricing-An integrative framework for decision making," Industrial Marketing Management (2004).
• Research on cost-based and value-based pricing approaches in B2B markets. Guerreiro & Amaral (2018)
• Harvard Program on Negotiation research summaries on anchoring, first offers and reservation points.
• Coulter & Coulter, "Distortion of Price Discount Perceptions: The Right Digit Effect," Journal of Consumer Research (2007). Coulter & Coulter (2007), Journal of Consumer Research

Related reading: \2 · \2