You’ve heard it all before.

• pricing is crucial!

• you have to get this right

• do it wrong and you’ll lose your company 😬

• be creative with it it will set you apart!

blah blah rising cortisol
blah blah panik in the castle courtyard
blah blah.

Not helpful.

The best resource on pricing i’ve found is Bob Litterst’s excellent newsletter Good, Better, Best.

But much as i love it, it is written for pricing wizards (the kind you’d want advising a CEO king).

And i’m guessing you don’t have the headcount or coffers for a dedicated pricing mage.

So here’s my approach to pricing changes, whether you’re starting from a blank scroll or have a few data points.

Let’s get those Stripe notifications 🎶singing 🎶 like a Gregorian choir.

What do you want from this pricing pilgrimage?

Set your sights so you don’t veer into the wildlands.

Do you want to fill the royal coffers quickly?

Then once you go through this decision tree, you might want to focus on your marketing efforts on higher price-point customers that require a low-to-medium-touch sales focus.

If you want more loyal villagers to protect against churn?

Then maybe focus on your stickiest customers, whatever price point that’s at.

Does your pricing just give you the ick and you want something that lets you sleep like a dragon on its hoard?

This will give you that answer too.

The pricing info decision tree matrix 🌳 

Okay, so the name is a work in progress.

But here’s how I think through pricing to figure out what the root issue is, and the best way to solve it.

hint hint: you’re gonna want to pull up your customer research database as you go for this!

Question 1: What use cases does the product have?

Everything after this will be based on those use cases, so make sure you are going off of real data and not wild tavern gossip.

Questions from your interviews + product data to answer this question:

• Interviews: How are you using [product]? What’s your job title? What industry are you in?

• Signup/Onboarding/Product data: Multiple choice question: I’m using product for [use case]

Question 2: What kind of customer are each of those use cases?

Think of them as classes in the kingdom:

• Enterprise lords (multi-step pricing, lots of scrolls to sign)

• Medium merchants (~3 decision makers, purchaser and user are not the same person)

• Small tradesfolk (1–2 decision makers)

• Prosumer apprentices (user/purchaser is the same person)

• Everyday villagers (consumers)

Make a note on the sales process here too.

The more self-serve, the easier to plan pricing.

1. Completely Sales-led (FLS/SLG)

2. Mostly sales, some self-serve

3. 50/50 split of self-serve and sales

4. Mostly self-serve, some sales

5. Completely self-serve (PLG)

Questions from your research + internal notes to answer this question:

• Interviews: How did you find [product]?

• CRM: What was your sales process for them? time to close? Number of buyers?

Question 3: How often do each of those use cases use the product?

Is it daily bread…or just for festivals and tournaments?

Questions from your product data to answer this question:

• What are the usage stats by use case?

• Does this industry have buying trends/seasonality?

• Is this use cases’ product usage consistent or sporadic?

• Does their usage coincide with the industry trends?

Question 4: What features does each use case prize most?

List out which features each one uses and/or needs.

For every product I’ve worked with, customers are begging for a feature that…already exists.

Now’s a great time to update the copy under your pricing page to include those features. And price accordingly.

Questions from your research to answer this question:

• What features do you love? How does [product] fit into your workflow?

• What features do you wish we had? What do you wish you could do with [product] that you can’t now?

Questions from your product data to answer this question:

• Do they use different features at different seasons or times?

• Is there ever a spike in usage?

• Do all members of the team use the same features (if there are multiple people from a company using it)

Question 5: How much is the product worth to them?

Here are 3 anchors to help you figure that out.

1. How much does it cost them to stick with status quo?

Maybe it’s the man hours to complete a task that your product automates. Maybe it’s

But the biggest stopping block (especially as the economy starts to teeter) is making no change. So this is the biggest thing you’re competing against.

Questions from your research to answer this question:

• What were you doing before?

2. How do your customers feel about your pricing?

Questions from your research to answer this question:

• open response questions - customers will usually tell you what value they feel your product has if asked

3. What’s the all-in cost of competitors?

Very rarely is there a product that is a complete 1:1 competitor to yours.

Often you’re competing against combos of features of other products (free and paid).

For example, Peasant uprising weapons

Status quo: Pitchfork
Competitors: Battle Axe, Mace

If you’re selling double-edge swords, you’re competing against the sharpness of a battle ax, the heft of a mace, and the ease of a pitchfork.

But your sword is an all-in-one solution for all three! And you’re great for farmers used to pushing plows with excellent upper-body strength.

Questions from your research to answer this question:

• What were you doing before?

• What other solutions are you trying/did you try?

What pricing makes the most sense for your product?

Here are the main groups of pricing:

• Cost-Based: which adds a markup to production costs

• Value-Based: which charges based on customer perceived value

• Competition-Based: which sets prices relative to competitors

And main Freemium pricing types (from Bob Litterst’s model):

• Based on time constraint (free trial)

• Based on usage constraint (faux free trial)

• Based on feature constraint (perpetual value)

Based on all of those decision-tree answers, here’s how to decide whether you need to rearrange, restructure, or truly raise pricing

A: Rearrange (messaging problem)

Reorganizing the armory so knights actually see the weapons you already have.

This is you if: Customers are asking for features that already exist, your pricing page conversion rate is “meh”

Here’s what to do about it:

• Group the features by usage and use case overlap

• See what pricing makes sense for those feature groups based on value-for-that-use case -

  • there’s a possibility that you don’t need to change the pricing for all the tiers

  • or that you just need to change the pricing format, going from one-time to monthly, going from flat price to seat-based

• Re-write your pricing page to make it clear what pricing tiers are best for which use case(s) and outcome(s).

What you’ll get when you do this: higher pricing page conversion rates, fewer support requests and public complaints around features that were already there.

B: Restructure (use case problem)

Deciding whether you’re serving nobles, merchants, or villagers.

This is you if: You realize your messaging and pricing page are trying to serve completely different audiences

Here’s what to do about it:

• Decide which use cases you actually want to target

• Break down your pricing tiers based on size of company in that use case and the features/feature usage that each size company needs

• Re-write your pricing page to talk specifically to those use cases, let the rest buy you if they so choose

What you’ll get when you do this: A clear progression between pricing tiers, so easier upselling and high referral rates. Customers who want the same thing, which makes them easier to sell to and build for.

C: Raise pricing (value problem)

When you realize you’ve been selling dragonfire for the price of a candle.

This is you if: your pricing is so low it’s barely covering your costs and you have no margin to scale

Here’s what to do about it:

• Decide what a healthy price change is based on the (30% raise is the MAX i would do at one time. 15-20% is safer)

• If it’s a big jump to get to that price range,

  • then set 3 incremental changes so the price inches up a bit but not in a painful way

  • OR if you really just care about new customers paying the price, then give existing customers legacy pricing status - bonus points if you let any of their future referrals have legacy pricing too!

Here’s how to communicate it it:

• let your customers know multiple times

• give them an easy way out

• give them a way to let you know what they’re thinking

What you’ll get when you do this: Churn (sorry, you will!), but each subsequent conversion will let you sleep better at night because you’re not losing money

No matter what you choose, be sure to clearly communicate with customers what’s happening and how it affects them multiple ways.

• in-app pop-up

• email series - one month out, 2 weeks out, as soon as it happens.

• a static blog post/update that you can link to that has all the details on who it will affect, when, and what that will mean, plus a way to contact you.

Example message when you’re going to change pricing (truncate or expand based on format):

“Hello [name]!

We’re moving some things around with our pricing starting [date] and wanted to give you a heads up.

• change from x → y

• change z → a

• change from b → c

Here’s what it will mean for you.

• will mean y

• will mean a

• will mean c

Have thoughts and feelings on the pricing change?

Reply back and tell us! We read every email.

You do not need to give a reason why. Brene Brown said so.

If you’re doing it for a clear outcome based reason:

• “We know that the industry is struggling and we want to make it easier for you to hit [outcome] without worrying about breaking the bank.”

Or a clear customer-centric reason:

• “We’ve been talking and listening and realized that a lot of you are using [product] for [outcome/use case]. Our previous pricing was clear as mud for that [outcome], so we’ve cleaned it up to make it squeaky clean that we’re for you [use case]!

Then go ahead and say so!

But if you’re doing it for a purely money reason (hey, we realized we were probably undercharging and we need to make more money) then don’t give a reason.

The customers love the product enough to stay and thought they were getting a steal to begin with (because you used customer research to get to this decision, right riiiiighttttt!).

Three final words of wisdom:

• If your messaging is unclear, no amount of new gold-coin pricing will save you.

• Always keep your pricing posted in the village square (your website). This is not some shadowy medieval guild deal.

• Maintain your pricing ledger (spreadsheet/Notion) and note each change like a royal decree.

May your coffers fill, your villagers stay loyal, and may you never end up with your dragon’s head on the wall. 🐉👑

But if all this feels like juggling too many torches in the king’s courtyard…

We can help you tame your pricing dragon and shape a plan that won’t land your head on the king’s wall based on your customers.
In 6 weeks or less.

Book a call here, and let’s chat

Not you now? Tell your fellow villagers (aka forward this newsletter!).

We’ll see you and your inbox next week!

Cheers!

Sophia ⚡👩🏽‍💻 & Aelia 🪄🧕🏽

P.s. you might have noticed you’re not getting this newsletter as often. We’re switching to an every-other-week cadence to keep the content quality up and our sanity with it. Each issues takes a good 6-8hrs to write and doing it all in one week is…yeah. Not super feasible as we head into busy, wedding, holiday season!

Powered by the darling children’s book How Droofus the Dragon Lost His Head, one of my all-time favorites & cross stitching anatomical hearts 🫀