Pricing Strategy

Overview

Price is a structural decision, not a calculated number. Cost-plus and competitor-matching both ignore 50 years of pricing research: what people pay is shaped by reference points, anchoring, loss aversion, and offer structure — not by cost. Kahneman & Tversky (Econometrica 1979): losses hit ~2× harder than equal gains. Thaler (1980): endowment effect and mental accounting drive consumer pricing behavior.

Compose with: first-principles · probabilistic-thinking · pareto-principle · pmf-crossing-the-chasm.

When to Use

Apply when: setting initial prices; planning a price change (especially raising); designing freemium/tiered/usage structures; sales asks for discounts >1/week; competitors' price is the only input; pricing an AI product against volatile/falling inference costs and choosing seat- vs. usage- vs. outcome-based models, protecting gross margin as AI capex and model releases shift the cost floor, or defending price against AI-native competitors pricing off the same collapsing token cost.

When NOT to use: no demonstrated value (use lean-startup); price regulated; purely tactical single-deal discount; LTV/CAC already working and question is execution only.

Coaching Novices (Adaptive Front Door)

• Engine mode: user has segment + value data → run The Process directly.
• Coach mode: vague or unfamiliar → guide step by step.