How should a B2B software company set its pricing strategy?

Pricing is a model, not a label

Announcing the episode, Mathieu described pricing as his favourite product marketing topic:

A game that consists of finding the perfect balance between the business and the value delivered.

Mathieu Seguy, LinkedIn post of 1 October 2024, translated from French

The episode starts by widening the word. A price on a tag is the visible part. Pricing also decides how the offer is cut into plans, what each plan contains, which limits apply and what a customer pays for: users, usage, contacts or a flat fee. Mathieu describes tiering as a fundamental of B2B software: an entry plan to taste the product, a middle plan that carries most of the value, and a top plan that captures more from the customers who need more.

Price is also a positioning signal. A brand priced high tells the market it is premium; a newcomer that cuts prices sharply redraws the market around it. Either way, the price says something before the sales team does.

Five models, and the one he prefers

Mathieu walks through the common models and says plainly which ones he likes least and most.

• Competitor-based: look at what others charge and align. Easy to run, little to defend, rarely the most profitable.
• Tiered: three plans with clear names and clear steps. The most common model in software.
• Flat rate: one price for everyone. Very readable, but it loses the smaller customers who cannot afford it and leaves money on the table with the largest ones.
• Usage-based: pay for what you consume. Readable too, until a large customer’s bill grows faster than the value they feel.
• Per seat: pay per user. Natural for collaboration tools, and increasingly criticised as teams grow.

His preference is value-based pricing: charge for what matters most to the customer. The example he gives is a marketing platform that charges by contacts rather than by emails sent, because the contact is where its customers see the value. In practice most companies end up with a hybrid, and that is fine as long as it stays readable.

Find the value metric before the price

Choosing the model starts with the product. The question is which unit grows when the customer gets more out of it: contacts, pages, transactions, seats. That unit is the value metric, and it should tie what the customer pays to what the customer gains.

From there, Mathieu combines three inputs. Research with customers and prospects, where his preferred method is Van Westendorp’s price sensitivity survey, which defines a band between too cheap and too expensive. A look at competitors’ models, not to copy them, but to know what buyers are used to and how much effort it takes to break the habit. And the economics: over the life of a customer, the price must bring in more than it cost to acquire them.

Put the upgrade where the value is felt

Two practical rules come out of the conversation about tiers.

The pricing page is not a landing page. Product marketers are trained to talk about benefits rather than features, and that is right in a campaign. On the pricing page, the prospect already knows who you are and wants the detail: what is in each plan and where each limit sits. Hidden conditions behind an asterisk destroy that trust.

The second rule is about friction. Every tiered model creates a moment where the customer has to pay more to continue. Mathieu describes an engagement with a quoting and invoicing tool for small businesses. The instinct was to charge for each e-signature, because it cost money. Research showed the value was felt later, when a signed quote turned into an invoice in one click. Including e-signature in the entry plan and placing the upgrade on the automatic conversion converted better than charging for each signature.

Testing a price without breaking billing

Mathieu does not recommend A/B testing prices. Customers who signed at the lower price stay on a plan you will carry for years, and in some sectors it is not possible at all. Sensitivity research gives a cleaner reading.

Then watch the signals that already exist: conversion that drops, average revenue per user that falls, churn that rises (not always because of price, but worth checking), deals lost on price in the win and loss analysis, and discounts that go beyond the range sales is allowed. If deals only close with a discount, the price or the value story has a problem, and heavy discounting erodes the perceived value of the product.

Pricing needs an owner

The episode ends on two convictions. First, in a tight market many companies could stop shipping new features for months and still find growth in what they already have: value to extract, segments to win, customers to serve better. That takes hard choices, such as dropping a segment that takes half the effort for a sliver of the revenue.

Second, pricing is the most important topic most companies leave without a clear owner. It touches the whole company, and it needs product, marketing and sales pulling in the same direction.

How this maps to the twelve disciplines

Pricing is the sixth discipline, Design Your Revenue: charge for what grows when your customer wins. It sits next to Own Your Unfair Advantage, because the price is part of the positioning, and the two are worked together in the Positioning Sprint.

Choosing where the upgrade sits belongs to Activate, then Expand: the money is in the customers you already have. And reading churn, lost deals and discounts as pricing evidence is Close the Feedback Loop. The case for giving pricing a named owner runs through what product marketing actually is.