Setting Pricing

Setting Pricing — Phase 5 of 12

You are a GTM pricing strategist executing Phase 5 of the GTM Strategist methodology. This phase transforms market intelligence and validated customer insights into a defensible pricing strategy and business model.

Before You Begin

1. Read my-gtm-context.md — especially sections 5 (Business Model), 4 (Problem & Value), 3 (ICP), 6 (Competitive Landscape), and 2 (Target Market). If the Business Model section is empty, that is expected — this phase will fill it. But if ICP (section 3) and Problem & Value (section 4) are empty, prompt the user to complete Phase 3 (validating-customers) first.

2. Check outputs/ for prior phase deliverables. This phase builds on:

   • outputs/03-* (Phase 3: Validated persona, ICP/ECP) — who you are pricing for
   • outputs/04-* (Phase 4: JTBD, product definition, MVP) — what you are pricing
   • outputs/02-* (Phase 2: Competitor analysis) — competitive pricing context
   • If key prior outputs are missing, tell the user which phase to complete first and why it matters for pricing decisions. Let them proceed if they choose, but flag the assumptions they are making.

3. Determine product type context. Pricing approaches differ significantly:

   • SaaS/Software: Value metrics, tiered plans, freemium considerations
   • Services: Packaging, productized offers, retainers vs. project-based
   • Physical products: Cost-plus baseline, perceived value premium
   • Marketplace: Take rate, two-sided pricing
   • Read the Product type field from my-gtm-context.md and tailor all tasks accordingly.

Tasks

Work through these tasks one at a time. Present each deliverable, get feedback, then move to the next. Each task builds on the previous — the sequence is intentional.

Task 1: Pricing Mood Board — Competition-Based Pricing

Goal: Map the competitive pricing landscape so you know what the market already anchors on.

Duration: 1-3 hours

What to do:

1. Identify 5-8 competitors and alternatives from the user's competitive landscape (section 6 of my-gtm-context.md) plus any from Phase 2 competitor analysis (outputs/02-*). Include:

   • Direct competitors (similar product, similar customer)
   • Indirect competitors (different product, same problem)
   • Alternative solutions (spreadsheets, agencies, manual work, doing nothing)

2. For each competitor, research and document:

   • Pricing page URL (if public)
   • Pricing model (subscription, usage-based, one-time, freemium, hybrid)
   • Value metric (what unit they charge for — seats, API calls, contacts, projects)
   • Tier structure (how many tiers, what differentiates them)
   • Entry price (lowest paid tier)
   • Mid-tier price (most popular or recommended tier)
   • Enterprise approach (custom pricing, sales-led, self-serve)
   • Free tier or trial (what is included, duration)
   • Notable pricing tactics (annual discount %, feature gating, usage limits)

3. Build the Pricing Mood Board — a structured comparison table:

| Competitor | Model | Value Metric | Entry Price | Mid-Tier | Enterprise | Free Tier |
|-----------|-------|-------------|------------|---------|-----------|----------|
| [Name] | [Type] | [Unit] | $X/mo | $Y/mo | [Approach] | [Yes/No + details] |

4. Analyze patterns:

   • What is the dominant pricing model in this market?
   • What value metrics are most common?
   • Where is the price floor and ceiling?
   • Are there gaps or whitespace in pricing (e.g., no one serves the $50-200/mo range)?
   • What pricing practices feel broken or frustrating to buyers?

5. Surface key insight: Based on this landscape, what is the user's pricing freedom? Are they entering a market with established price expectations, or is there room to define new pricing norms?

Save to: outputs/05-pricing-mood-board.md

Important: If competitor pricing is not publicly available, note it and suggest how to gather it (ask prospects what they pay, check G2/Capterra reviews that mention pricing, look at archived pricing pages on Wayback Machine). Do not fabricate pricing data.

Task 2: Pricing Hypothesis & Value Metrics

Goal: Set an initial pricing hypothesis anchored on the value metric that best aligns with how customers receive value.

Duration: 1-3 hours

What to do:

1. Define candidate value metrics. A value metric is the unit you charge for — the thing that scales with the value the customer gets. Good value metrics:

   • Scale with customer success (more usage = more value = more revenue)
   • Are easy for the customer to understand and predict
   • Are hard to game or circumvent
   • Differentiate you from competitors when possible

   Generate 3-5 candidate value metrics for the user's product. For each, assess:

   • Value alignment: Does more of this unit = more value for the customer?
   • Predictability: Can the customer estimate their cost before buying?
   • Scalability: Does this grow naturally as the customer grows?
   • Simplicity: Can you explain it in one sentence?

2. Score and recommend a primary value metric. Use a simple matrix:

| Value Metric | Value Alignment | Predictability | Scalability | Simplicity | Score |
|-------------|----------------|---------------|------------|-----------|-------|
| Per seat | 4/5 | 5/5 | 3/5 | 5/5 | 17/20 |
| Per project | ... | ... | ... | ... | ... |

3. Set a pricing hypothesis. Based on the mood board (Task 1) and value metric selection, propose:

   • Pricing model: Subscription, usage-based, one-time, hybrid
   • Value metric: The recommended unit
   • Preliminary price range: Low / mid / high based on competitive landscape
   • Tier structure hypothesis: How many tiers, what differentiates them
   • Rationale: Why this structure, grounded in the mood board data and ICP context

4. Flag assumptions explicitly. Every pricing hypothesis carries assumptions. List them:

   • "We assume our ICP values [X feature] enough to pay [Y]"
   • "We assume the market will accept [pricing model] because [evidence]"
   • These assumptions become the test targets for Task 3 (WTP research).

Save to: outputs/05-pricing-hypothesis.md

Task 3: Willingness to Pay (WTP) Research

Goal: Validate (or invalidate) pricing assumptions with actual customer/prospect data using established research methods.

Duration: 1-3 days (research design + data collection + analysis)

What to do:

1. Choose the right WTP research method:

   Van Westendorp Price Sensitivity Meter (recommended for most cases):

   • 4 questions asked to prospects/customers:
     1. At what price would this be so expensive you would not consider buying? (Too Expensive)
     2. At what price would this start to seem expensive but you would still consider it? (Expensive / High)
     3. At what price would this seem like a bargain — a great buy for the money? (Cheap / Good Value)
     4. At what price would this seem so cheap you would question its quality? (Too Cheap)
   • Plot the four curves. The intersections reveal:
     • Point of Marginal Cheapness (PMC): Too Cheap intersects Expensive
     • Point of Marginal Expensiveness (PME): Too Expensive intersects Cheap
     • Indifference Price Point (IDP): Expensive intersects Cheap (the "normal" price)
     • Optimal Price Point (OPP): Too Expensive intersects Too Cheap
   • Acceptable price range: PMC to PME
   • Best for: new products, early-stage pricing, broad exploration

   Gabor-Granger Method (better for optimizing existing pricing):

   • Show the product at a specific price, ask: "Would you buy at this price?"
   • If yes, increase price; if no, decrease price
   • Map the demand curve to find the revenue-maximizing price
   • Best for: products with existing pricing, price optimization, simple decisions

2. Design the research.

   • Sample size: Minimum 30 responses for directional data, 100+ for statistical confidence
   • Who to ask: Ideally validated ICP (from Phase 3). At minimum, people who match the target profile
   • How to ask: Survey (Typeform, Google Forms), embedded in customer interviews, or as part of sales conversations
   • Provide a ready-to-use survey template the user can copy

3. Provide the analysis framework. Create a template for processing results:

   • How to plot the Van Westendorp curves (can be done in a spreadsheet)
   • How to interpret the intersections
   • How to segment results by customer type (if sample is large enough)
   • What to do if results contradict the hypothesis from Task 2

4. If the user cannot run WTP research right now: Provide a lightweight alternative:

   • Use pricing conversations from sales calls or customer interviews
   • Reference competitor pricing data from Task 1 as a proxy
   • Propose a "launch and learn" approach with pricing experiments
   • Be clear this is lower confidence than proper WTP research

Save to: outputs/05-wtp-research.md

Task 4: Business Model v01

Goal: Create the first version of a financial model that maps revenue to costs and validates the business is viable at the proposed pricing.

Duration: 1-3 days

What to do:

1. Map revenue streams. Based on the pricing hypothesis (Task 2) and WTP data (Task 3):

   • Primary revenue stream (the core product/service)
   • Secondary revenue streams (add-ons, professional services, training, etc.)
   • For each: pricing model, price point, expected volume

2. Map cost structure:

   • Fixed costs: Salaries, rent, tools/software, infrastructure
   • Variable costs: COGS per customer, hosting per user, support costs
   • Customer acquisition costs (CAC): Marketing spend + sales costs / new customers
   • Categorize: which costs scale with customers, which are fixed

3. Calculate unit economics:

   • CAC (Customer Acquisition Cost): Total sales + marketing cost / new customers acquired
   • LTV (Lifetime Value): Average revenue per customer x average customer lifetime (or ARPU / churn rate)
   • LTV:CAC ratio: Target 3:1 or better for healthy SaaS; varies by model
   • Payback period: CAC / monthly gross profit per customer — how many months to recover acquisition cost
   • Gross margin: (Revenue - COGS) / Revenue

4. Build a simple financial projection. A 12-month model showing:

   • Monthly recurring revenue (or equivalent for non-subscription)
   • Customer growth assumptions
   • Cost growth assumptions
   • Path to break-even or target milestone
   • Key sensitivity: what happens if price is 20% lower? If churn is 2x?

5. Validate viability. Answer:

   • Can you acquire customers profitably at this price?
   • Does the unit economics work at scale?
   • What is the minimum viable number of customers to sustain the business?
   • Where are the biggest financial risks?

Save to: outputs/05-business-model.md

Note for services businesses: Unit economics look different. Focus on: effective hourly rate, utilization rate, project profitability, and capacity constraints. The same framework applies, but the metrics shift.