Pricing is a commercial system, not just a number

A pricing discussion often starts with a number: should we charge more, discount less or introduce a cheaper entry point?

Those questions matter, but the price on a proposal is only one part of the commercial system. Packaging, customer fit, sales incentives, delivery effort and renewal terms all affect what the business ultimately earns.

Before changing the number, understand the conditions around it.

Start with value and customer fit

The same offer can create very different value for different customers. One customer may use it to reduce a costly operational bottleneck; another may see it as a useful convenience.

A single broad proposition can make both customers difficult to price. Segment the market by the problem being solved, the scale of that problem and the customer's ability to realise value. Test whether the offer and its commercial terms fit each segment.

Avoid assuming that a prospect who declines a proposal has rejected the price alone. The real issue may be weak urgency, unclear differentiation, unsuitable packaging or uncertainty about implementation.

Inspect packaging before adding discounts

Packaging determines what the customer can buy and how easily they can connect the offer to an outcome.

Ask whether an entry package gives a customer enough value to succeed, whether premium tiers have meaningful differences and whether essential implementation support is priced transparently. An apparently affordable package can become difficult to sell if buyers cannot understand what is included.

Illustrative example: A software offer has a low subscription fee but requires substantial onboarding work. If onboarding is routinely absorbed without clear terms, sales may look healthy while delivery capacity and margin deteriorate. The intervention could be a clearer implementation package, not a higher subscription price alone.

Treat discounting as a decision with a cost

Discounts can be appropriate. The problem is not their existence; it is granting them without understanding what the business receives in return.

Define the circumstances in which a concession is reasonable, who can approve it and which conditions must be documented. A longer commitment, reduced scope or a different payment schedule may change the economics, but each needs assessment rather than automatic approval.

Track the reason for a concession. Distinguish competitive pressure from poor qualification, an unclear value case or a seller trying to protect an expected close date.

Connect selling economics to delivery economics

Review what happens after the contract is signed. Consider onboarding effort, service requirements, support demand, payment terms and the cost of meeting commitments.

A commercially attractive deal can become expensive if the business repeatedly promises work outside the standard offer. Sales and delivery should share a clear view of scope, assumptions and exceptions before commitments become binding.

Useful measures include realised price, discount levels, contribution after directly attributable delivery costs, renewal behaviour and expansion by segment. Define each measure explicitly; apparent margin differences can reflect inconsistent cost allocation rather than genuine performance.

Test a hypothesis, not a blanket change

Write down the problem a pricing change is intended to solve. Is the aim better margin, improved conversion in a particular segment, simpler buying or a more sustainable delivery model?

Set a review period and identify the signals that would support or challenge the hypothesis. Where feasible, test with a defined cohort or new offers while respecting existing commitments. Review legal and contractual implications before changing customer terms.

A price increase that improves unit economics but weakens fit in a priority segment may require a different package. A lower entry price that attracts customers who cannot succeed may create churn rather than durable growth.

Pricing works best when business strategy, market choices and execution support the same outcome. The number matters; the system around it determines whether that number is commercially useful.

Explore Business strategy & performance for the wider strategic context.