Optimise your product pricing for maximum value creation

Smart product pricing starts with your business strategy

Many companies regard product pricing as a purely numerical exercise, or even as guesswork. In reality, pricing starts with your business strategy. Every decision about features, segments or positioning determines how much value you actually capture.

At Product Day Louvain-La-Neuve and Product Day Ghent, Maarten Laruelle, pricing expert at Sirris, showed how product managers underestimate their impact on pricing and why product decisions are a direct lever for long-term growth. 

‘The biggest hidden price tag isn’t on your pricing page, but in your road map.’
 

Choose your value objective

Every pricing strategy starts from one basic question: what do you want to achieve as a company? Pricing follows from that choice, not the other way around.

Maarten distinguishes five strategic value objectives:
1. Market share: affordability, one simple basic package, maximum adoption. Premium features are your enemy here, because they reduce your addressable market
2. Revenue growth: serving multiple segments, optimising price × volume. This requires different packages that together appeal to a broad public
3. Profit margin: premium positioning with specialised features and white-glove service. The goal is not to have large numbers of customers, but to achieve high value per customer
4. Customer lifetime value: extendible packages that grow with the customer. Focus is on the long-term relationship, not on maximising initial sales
5. Land & expand: a small entry-level package that can be decided on by one person or department if necessary, with clear paths to subsequent expansion within the organisation. An all-in-one basic package is a dead end here

Unless you make this strategic choice, hidden costs will creep into your product strategy and you will create barriers to growth.
 

The role of product managers in product pricing

Product managers are close to the customer. They understand:

• What problems customers want to solve
• What results they want to achieve
• What alternatives they are considering
• How they make decisions.

These insights are crucial for appropriate pricing.

Maarten sums it up: ‘It sounds simple, but get in your customer’s head.’

So what then? Use these customer insights to make your packages logical, recognisable and understandable. By doing so, you will reduce friction, shorten the sales cycle, clarify your marketing message and boost your product’s growth potential.

How do you build a scalable pricing strategy?

Choose the right pricing metric

A poorly chosen metric is one of the biggest hidden price tags. Many SaaS companies automatically go for “price per user”, but this model rarely works well.

A poor metric says little about customer value, is difficult to scale up, increases churn and hinders adoption. By contrast, a good pricing metric is measurable, is recognisable to the customer, closely reflects business impact, is easy to invoice, and grows with the customer’s success.

Examples of metrics that work are those that reflect value:

• The number of data points the customer analyses or uses
• Transactions: especially when your product delivers value per action or process
• Activated modules: when each module delivers clear value
• Successful outcomes: where you invoice when the customer achieves a specific result
   

Design your pricing architecture in three layers

A scalable pricing model consists of:
1. Basic packages
The core functionality every customer needs; the size of the packages can vary depending on your customer’s maturity.
2. Add-ons
Extra functionality for customers with more maturity or complexity that cannot be accommodated in a package.
3. Consumption or outcome pricing
A variable component that evolves with the customer’s success. 

This model ensures stable core revenues, healthy expansion opportunities and lower churn, because pricing evolves to reflect the customer’s situation.
 

Adapt pricing to different customer groups using fencing

Can you sell the same product at different prices? Yes, if the value that the customer experiences differs.

This principle is called fencing: you create clear boundaries between customer groups, based on their job-to-be-done. Customers understand this. They don’t compare themselves with everyone else, but to customers with similar goals.

In his keynote, Maarten used the example of pinball machines:

• Arcades or cafés want to generate revenue per game, so a revenue-share model makes sense
• Individuals buy pinball machines as collectors’ items, making a one-time purchase price appropriate in this case

Technically, it’s 99% the same machine, but the job-to-be-done is completely different, so a different price is both logical and acceptable. Another well-known example is Zoom: one technology, different segments, different pricing models (healthcare, education, developers).

Change pricing for existing customers

“How do we change our pricing for existing customers?"

It’s a sensitive topic, but this can be achieved with the right approach. Maarten sees two feasible strategies:
1. Start with existing customers
Explain why you’re changing the pricing, what value has increased and how the new structure is better suited to their needs. Existing customers are often your biggest sponsors and fans: they genuinely want your company to survive and evolve, as long as this is in line with their needs.
2. Start with new customers, then return to your existing customers
In this case, you first build trust in the new model. When the new pricing is working, you can switch to your historical customer base and link new features to the new pricing model. Customers who want to grow will switch naturally.

Many companies are afraid of meeting resistance, but customers understand price increases when:

• The value increases
• The explanation is clear
• It’s necessary in order to maintain a healthy position as a supplier
• New features add extra value
   

Product pricing for AI: adjust your pricing model for each type

Many companies price AI functions the wrong way. Maarten distinguishes three AI types:
1. Autonomous AI: the AI-based solution delivers results completely independently. In this situation, you should opt for outcome-based pricing, where you set the price based on the outcome. Humans are completely removed from the process of achieving the result
2. Collaborative AI: here, AI increases user productivity, but the user is part of the creative process. A pricing model based on platform + usage is more suitable here
3. Efficiency AI: AI optimises or accelerates processes that don’t deliver much or any addressable value in themselves. You may be able to deal with this by raising the existing price or switching to consumption on top of the existing price

One mistake to avoid: pricing efficiency AI as if it was premium autonomous AI. This leads to resistance, lower adoption and customer confusion.

Step-by-step plan for smart product pricing

Step 1. Determine (or validate) your value objective
Talk to management (or if there is any lack of clarity, bring sales, marketing and product together): do you want market share, revenue, margin, CLTV or land & expand?
Step 2. Talk to customers
Interview or survey your customers to understand what progress they want to make and what their jobs-to-be-done are.
Step 3. Build your pricing architecture
Define your basic packages, add-ons, metrics and fencing.
Step 4. Test and improve
Sell your new model first. Only build billing and automation afterwards.
Step 5. Repeat, repeat, repeat
Make pricing a continuous process; avoid organisational rigidity.