pricing-strategy-analyst

# Pricing Strategy Analyst

## Overview

Transform pricing from gut feel to strategic lever that captures value and drives growth. This skill encodes the methodologies for value-based pricing, competitive analysis, packaging strategy, and price change execution that maximize revenue without sacrificing growth.

## When to Use This Skill

- **Pricing strategy development** — Building or revising pricing approach
- **Model evaluation** — Analyzing different pricing structures
- **Competitive analysis** — Understanding market pricing dynamics
- **Packaging design** — Creating product tiers and bundles
- **Price changes** — Planning and communicating adjustments

## Pricing Model Framework

### Pricing Model Comparison

| Model | Best For | Pros | Cons |
|-------|----------|------|------|
| **Per-seat** | Scalable tools, wide adoption | Predictable, simple | Limits adoption |
| **Usage-based** | Variable consumption | Aligns with value | Revenue volatility |
| **Tiered flat** | Defined segments | Easy to understand | May leave money on table |
| **Freemium** | PLG, network effects | Low friction | Conversion challenge |
| **Value-based** | Clear ROI solutions | Captures value | Requires proof |
| **Hybrid** | Complex value delivery | Flexible | Complexity |

### Model Selection Decision Tree

```
Is value easily quantified?
├─ Yes → Does value scale with usage?
│        ├─ Yes → Usage-based or hybrid
│        └─ No → Value-based or outcome-based
└─ No → Is adoption critical?
         ├─ Yes → Per-seat or freemium
         └─ No → Tiered flat rate
```

## Value-Based Pricing Methodology

### Step 1: Quantify Customer Value

**Value Drivers to Calculate:**

| Value Type | Formula | Example |
|------------|---------|---------|
| **Time savings** | Hours × Rate × Frequency | 5 hrs/wk × $75 × 52 = $19,500 |
| **Error reduction** | Errors × Cost × Reduction% | 100 × $500 × 50% = $25,000 |
| **Revenue uplift** | Pipeline × Conversion × Lift | $1M × 20% × 10% = $20,000 |
| **Cost avoidance** | Cost × Reduction% | $200K × 30% = $60,000 |

### Step 2: Determine Value Share

**Typical Value Capture Rates:**

| Confidence in Value | Customer Sophistication | Value Capture |
|--------------------|------------------------|---------------|
| High proof | Low | 15-25% |
| High proof | High | 10-15% |
| Low proof | Low | 5-10% |
| Low proof | High | 3-5% |

**Example:**
- Customer value created: $100,000/year
- Confidence: High (case studies)
- Sophistication: Medium
- Target value capture: 15%
- Price: $15,000/year

### Step 3: Validate Against Market

Check price against:
- Competitor pricing (±30% of market acceptable)
- Customer willingness to pay (survey or test)
- Cost to serve (ensure margin target met)

## Competitive Pricing Analysis

### Competitive Pricing Matrix

| Competitor | Model | Entry Price | Mid Price | Enterprise |
|------------|-------|-------------|-----------|------------|
| Competitor A | Per-seat | $15/user | $45/user | Custom |
| Competitor B | Flat tier | $99/mo | $299/mo | $999/mo |
| Competitor C | Usage | $0.10/tx | $0.08/tx | Volume disc |
| **Us** | [Model] | [Price] | [Price] | [Price] |

### Positioning Decision

| Position | When to Use | Trade-offs |
|----------|-------------|------------|
| **Premium** | Superior product/brand | Lower volume, higher margin |
| **Value** | Comparable product | Higher volume, lower margin |
| **Disruptor** | New entrant, land-and-expand | Short-term margin pain |
| **Custom** | Enterprise focus | Sales complexity |

## Packaging Strategy

### Good-Better-Best Framework

| Element | Good | Better | Best |
|---------|------|--------|------|
| **Target** | SMB, cost-conscious | Mid-market, growing | Enterprise, sophisticated |
| **Price** | $X | $2-3X | $5-10X |
| **Features** | Core only | Core + productivity | Full platform |
| **Support** | Self-serve | Business hours | 24/7 + dedicated |
| **Goal** | Volume, land | Conversion | Value capture |

### Tier Design Principles

1. **Each tier should have a clear "hero" feature** that justifies the jump
2. **Middle tier should be the target** — design around it
3. **Create 2-3x jumps between tiers** for clear differentiation
4. **Don't gate must-have features** on highest tier only

### Feature Gating Framework

| Feature Type | Gate Decision |
|--------------|---------------|
| **Core value** | Include in all tiers |
| **Productivity** | Gate to mid-tier |
| **Scale/Admin** | Gate to upper tiers |
| **Support level** | Tier appropriately |
| **Compliance** | Gate to enterprise |

## Price Elasticity Assessment

### Willingness to Pay Research

**Van Westendorp Questions:**
1. At what price would this be too expensive?
2. At what price would this be expensive but still acceptable?
3. At what price would this be a bargain?
4. At what price would it be too cheap (quality concerns)?

**Analyze intersections:**
- Optimal price point: "bargain" crosses "expensive"
- Acceptable range: "too cheap" to "too expensive"

### Price Sensitivity Indicators

| Signal | Indicates |
|--------|-----------|
| Customers don't negotiate | Room to raise |
| High close rate | Possibly underpriced |
| Price is top objection | At or above ceiling |
| Customers ask for more features | Value perceived |

## Price Change Execution

### Price Increase Framework

**When to Raise Prices:**
- Cost of goods/delivery has increased
- Value delivered has increased (new features)
- Market rates have increased
- Significant time since last increase (2+ years)

**How Much to Raise:**
- Small increase (5-10%): Annual inflation adjustment
- Medium increase (10-20%): Value-justified
- Large increase (20%+): Restructure/reposition

### Grandfathering Strategy

| Approach | When to Use |
|----------|-------------|
| **Hard cutover** | Small increase, new customers only |
| **Grace period** | Medium increase, 6-12 month notice |
| **Permanent grandfather** | Large increase, loyal customers |
| **Gradual phase-in** | Enterprise, contractual requirements |

### Price Change Communication

**Customer Communication Template:**

> Subject: Important update to your [Product] subscription
>
> Hi [Name],
>
> I'm writing to let you know about an upcoming change to [Product] pricing.
>
> **What's changing:** Starting [date], your plan will change from $[old] to $[new] per [period].
>
> **Why:** [Honest reason — investment in product, market alignment, etc.]
>
> **What you're getting:** [List value added since last price]
>
> **Timeline:** This change takes effect on [date]. Your rate is locked until [date].
>
> **Questions?** Reply to this email or book time with me: [link]
>
> We appreciate your partnership and are committed to continuing to deliver value that exceeds your investment.

**Internal Sales Communication:**

> **Talking Points:**
>
> If asked "why are prices going up?":
> - We've invested significantly in [features/improvements]
> - Our pricing was below market for our value
> - This allows us to continue investing in the product
>
> If asked "what about my renewal?":
> - Existing customers are [grandfathered/have grace period]
> - New pricing effective [date]
>
> If asked for discount:
> - Our standard policies apply
> - Focus on value, not price

## Pricing Metrics to Track

### Health Metrics

| Metric | Formula | Target |
|--------|---------|--------|
| **ARPU** | Revenue / Customers | Increasing |
| **Price realization** | Actual vs. list price | >85% |
| **Discount rate** | Discounts / Gross revenue | <15% |
| **Expansion revenue %** | Expansion / Total new ARR | >30% |

### Warning Signs

| Signal | Possible Issue |
|--------|----------------|
| ARPU declining | Value erosion or mix shift |
| Discount rate increasing | Price pressure or sales behavior |
| Win rate dropping after price change | Overpriced |
| Churn spike after price change | Customer value mismatch |

## Resources

### references/
- **pricing-models-deep-dive.md** — Detailed model analysis
- **competitive-intel.md** — Competitor pricing data
- **elasticity-research.md** — WTP research methodology

### scripts/
- **value-calculator.py** — Calculates value-based pricing
- **price-sensitivity-analyzer.py** — Analyzes survey data

### assets/
- **pricing-matrix-template.xlsx** — Competitive analysis
- **price-change-template.docx** — Communication templates