Key Takeaways from “Your pricing is (probably) broken”:
- No perfect pricing model: Every common software pricing model has flaws, and most founders feel their pricing isn’t optimized—but that’s normal.
- Flat-fee subscriptions:
- Pros: Predictable, simple billing for customers.
- Cons: Smaller customers get priced out, big ones pay too little, no expansion revenue, risk of low margins.
- Action items: Add premium editions, charge for add-ons, include price escalator clauses, set fair usage policies.
- Feature-based pricing (Bundle hell):
- Pros: Familiar “Good-Better-Best” plans.
- Cons: Most choose the middle tier, plans feel arbitrary, confusion over features, each new feature causes rework.
- Action items: Clarify value proposition for each plan, offer standalone features before (re)bundling, use progressive feature gating for upsell.
- Seat-based pricing (Old school):
- Pros: Classic model, but less effective in the AI era.
- Cons: Fewer seats needed due to AI, value doesn’t scale by seat, customer variability, account potential capped.
- Action items: Add “lite user” seats, require minimum users on plans, add usage paywalls, pilot usage-based expansion for enterprise.
- Usage-based pricing (CFO headache):
- Pros: Flexible, pay-as-you-go.
- Cons: Hard to forecast spend, not all usage is valuable, risk of customers self-limiting, unclear metrics.
- Action items: Train sales to forecast usage/ROI, lead with top ROI use case, align sales incentives with realized usage, give admins usage visibility, try usage-based subscriptions for predictability.
- Hybrid pricing (Complexity++):
- Pros: Mix of seats and usage.
- Cons: Complexity, hard to understand costs, internal management challenges, can feel like bait-and-switch.
- Action items: Use unified credit models, reduce actions that consume credits, tailor offers for segments.
- Outcome-based pricing (“Pipe dream”):
- Pros: Customers pay for impact.
- Cons: Hard to measure outcomes, bill disputes, unpredictable success, narrow attribution.
- Action items: Align on outcomes upfront, use performance guarantees, introduce platform fee + outcome bonus, let customers choose pricing models.
Conclusion:
There’s no perfect model—choose one that lets you tell your story, manage inevitable downsides, and continually improve. Don’t abandon your broken pricing; instead, fix it.