Pricing Strategies For Retail

AI pricing is broken, and everyone knows it. Orb just analyzed 66 AI companies and found something interesting: 𝟗𝟐% 𝐡𝐚𝐯𝐞 𝐚𝐥𝐫𝐞𝐚𝐝𝐲 𝐝𝐢𝐭𝐜𝐡𝐞𝐝 𝐬𝐢𝐧𝐠𝐥𝐞-𝐦𝐨𝐝𝐞𝐥 𝐩𝐫𝐢𝐜𝐢𝐧𝐠. Quietly, completely, across the board. Why? Because usage is unpredictable, infra costs are high, and old SaaS pricing just doesn’t cut it anymore. We’re not pricing features anymore. We’re pricing intelligence. Some insights from the report: ◾𝐇𝐲𝐛𝐫𝐢𝐝 𝐩𝐫𝐢𝐜𝐢𝐧𝐠 𝐢𝐬 𝐭𝐡𝐞 𝐧𝐞𝐰 𝐬𝐭𝐚𝐧𝐝𝐚𝐫𝐝 – 92% blend subscription, usage, freemium, and tiers in one structure ◾𝐓𝐡𝐞 𝐦𝐨𝐬𝐭 𝐜𝐨𝐦𝐦𝐨𝐧 𝐜𝐨𝐦𝐛𝐨? Subscription + usage + freemium + tiered plans ◾𝐏𝐞𝐫-𝐬𝐞𝐚𝐭 𝐢𝐬𝐧’𝐭 𝐝𝐞𝐚𝐝, 𝐛𝐮𝐭 𝐢𝐭’𝐬 𝐧𝐞𝐯𝐞𝐫 𝐚𝐥𝐨𝐧𝐞 – 85% of companies using SaaS pricing now pair it with usage-based pricing ◾𝟏𝟐% 𝐫𝐮𝐧 𝐦𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐦𝐨𝐝𝐞𝐥𝐬 𝐢𝐧 𝐩𝐚𝐫𝐚𝐥𝐥𝐞𝐥 – often segmenting between business and individual users … This shift is more than cosmetic. It reflects a deeper reality: AI products don’t fit cleanly into legacy monetization models. They need pricing systems that scale with usage, support experimentation, and reflect actual value delivered. If you’re building in AI, your pricing strategy isn’t just a detail, it’s a growth lever. 📊Full report https://lnkd.in/g-R3_cwU It’ll reshape how you think about monetizing AI.

We're moving away from charging for *access* to software and toward charging for the *work delivered* by software & AI agents. Don't freak out: this doesn't mean everything will become *pay-as-you-go* overnight. I can think of 7 flavors of charging for work: 1️⃣ Pay-as-you-go - No commitment, totally flexible - Enterprise procurement teams usually *hate* this! - Works best when your customers can bill-back the expense or bake it into an operating budget - Otherwise, there's a risk of customers policing their own usage (taximeter effect) 2️⃣ Subscription + pay-as-you-go - Small level of commitment helps 'lock customers in' and give them access to advanced features, support, etc. - Works well when the usage metric is getting commoditized (ex: SMS messages, compute, storage) -- you can advertise a low usage fee & make up for it with the subscription fee - Still not quite loved by enterprise procurement since their bill isn't predictable yet now includes multiple line items... 3️⃣ Three-part tariff (usage subscription + PAYG) - Similar to the above, but with a larger subscription fee that includes some level of usage "included" - Folks usually advertise the initial usage as a gift ("get your first 500 SMS messages for free!") - Including a minimum level of usage helps get the customer hooked & usually incentivizes more overall consumption 4️⃣ Usage-based subscription (high watermark) - Customers commit to a certain level of usage or tier (ex: up to 5,000 API calls per month); this is typically "use it or lose it" - Subscriptions are for a high watermark of usage -- if usage exceeds the plan in a given month, they immediate move into upgrade territory - Fear of overages + usage fluctuations encourages sales to over-sell & customers to over-buy 5️⃣ Usage-based subscription (annual drawdown) - Similar to the above, but the usage allocation can be consumed flexibly over the course of 12 months similar to a gift card - This gives the customer plenty of time to monitor adoption & plan for an early renewal/upgrade if usage is trending above their commit - Great for customers with seasonality or month-to-month usage fluctuations who still want a predictable bill 6️⃣ Roll-overs - If the customer doesn't consume their full allocation, they can "roll it over" to the next year -- typically only if they commit to a flat or increased renewal - More customer friendly, but also more painful to manage! 7️⃣ Adaptive flat rate - The customer commits to a usage-based subscription, but can use the product as much as they want with no overages/upgrades during that period - Their tier resets up/down at renewal based on their actual usage behavior - Much more predictable for customers while encouraging them to increase consumption (downside is that you could be stuck with the costs!) -- I suspect most folks will offer multiple options as they seek to balance lands, expands & tough procurement convos. The downside: complexity.

"Is $20/month too much for our product?" Instead of guessing, we used the Van Westendorp method to find our pricing sweet spot. 4 questions revealed exactly what users would pay (and we haven't touched our pricing since). Here's the framework any founder can steal: 1. Send a survey to actual users, not prospects We surveyed people already using Gamma. They understood the real value of our product, not hypothetical value. Too many founders survey their waitlist or randomly select people who have never used their product. That's like asking someone who's never driven about car prices. 2. Ask these 4 specific questions - At what price would this be too expensive for you to consider it? - At what price is it expensive but still delivering value? - At what price does it feel like a bargain? - At what price is it so cheap you'd question if it's reliable? These create bookends for perceived value. You're mapping the entire spectrum of price psychology, not just asking "what would you pay?" 3. Plot the responses and find where the lines intersect Graph responses from lots of users. Where "too expensive" and "too cheap" lines cross: that's your acceptable range. Where "expensive but fair" meets "bargain": this is your optimal price point. 4. Test within the range, don't just pick the middle The intersection gives you a range, not a number. We ran pricing experiments within that range to see actual conversion rates. A survey shows willingness to pay; testing reveals actual behavior. 5. Lean towards generous (especially for product-led growth) We chose to be more generous with AI usage than our "optimal" price suggested. Word-of-mouth growth matters more than maximizing initial revenue. Not everything shows up in the numbers. 6. Lock it in and stop tinkering Once you find the sweet spot through data, stick with it. We haven't changed pricing in 2 years. Every month debating pricing is a month not improving product. Remember: pricing is a signal, not just a number (Image: First Principles)

While competitors sold mattresses at ₹10,000, we launched at ₹29,900. Amazon and Flipkart said it wouldn't work, because our price was 3X what sells on their platforms. Today, The Sleep Company is the fastest-growing mattress brand in India. People ask how we convinced customers to pay a premium for a mattress. The answer isn't about pricing. It's about understanding value. Indian customers are willing to pay ₹1 lakh for an iPhone, and ₹2 lakh for a Royal Enfield. It’s not because they're "affordable”, but because the value is clear. So, the real question isn't "Can they afford it?" It's "Do they believe it's worth it?" Most brands price like this:  Cost + Margin = Price But, we flipped it to Value-Based Pricing:  What's the transformation worth to the customer? = Price Our product wasn't just 3x the price, it also delivered 5x the outcome. And every touchpoint communicated that. But most of the brands end up making these mistakes: 📍Underpricing to "get traction"  📍Overpricing without differentiation  📍Changing prices too often Here’s what worked for us instead: 📌 The sweet spot wasn't the lowest. 📌 Focused on value perception - packaging, unboxing, communication reinforced "premium." 📌 Invested in experience - website, stores, after-sales. Premium pricing demands premium delivery. As a result: 📍₹60,000 became our best-selling price point 📍Customers didn't ask "Why is it so expensive?" They asked, "When's the next collection?" Premium isn't about charging more. It's about being worth more. And if you deliver on that, the market will pay.

FinTech Pricing Models 💡 These are just some of the models used across B2B and B2C fintechs, but there are more and different categories of fintech that tend to gravitate to different models. 1️⃣ Licence + Fee (Subscription Model) This is the classic model for B2C and B2B SaaS products, which charges a monthly or annual fee and covers all features within that given tier. It can be highly configured depending on the business with Lite, Standard and Premium tiers containing a progressively more valuable set of features or the tiering done based on the complexity of the end customer. Within this model, there is Flat Rate pricing, where a single flat fee is charged for the product or Tiered pricing, where the product is split into different tiers and priced accordingly. Subscription pricing in fintech is a lot more prevalent in SME-focused propositions than retail consumer products. 2️⃣ Usage Based In a usage-based pricing model, fintech companies charge customers based on how much they use their services or products. This can include charges for specific transactions, the volume of data processed, or the number of users. Used by providers that perform data-based services, checks or reports. 3️⃣ Take Rate (Percentage of transaction) The take rate pricing model involves fintech companies taking a percentage of the value of each transaction conducted through their platform and, therefore, prevalent in high-volume and high-value transaction organisations, which is why it's one of the more popular pricing models in fintech. 4️⃣ Freemium The freemium pricing model is probably the most popular strategy in the B2C side of fintech, offering users a combination of free and premium services. It allows fintech companies to attract a wide user base with free access to essential features, allowing for a wide onboarding funnel while monetising their offerings by charging for advanced or premium features. A key thing worth noting with these pricing models is they are usually not used in isolation or exclusively. What more mature platforms tend to do as they evolve and add more strings to their product stack is create a pricing model that reflects the different products. In Square’s case, a blended model for the retail package of take rate for transactions + subscription for the retail software reflects the benefits of each part of the package offering. Take rate for the ease of taking card payments and a subscription for the retail management software. Source: Jas Shah - https://bit.ly/3PgcsdN #Fintech #Banking #OpenBanking #EmbeddedFinance #API #FinancialServices #Payments #Lending #Data #ProductManagement #Pricing #Marketing

A lesson I wish I had learned earlier: How to attract customers who are happy to pay more I spent years chasing people who haggled, looking for deals or asking for discounts. Every sale was a battle. But when I made a few simple shifts, I quickly learned higher-paying clients are 10x easier to work with than people looking for a deal. Because high-quality buyers don't need convincing. They see your content and think: "This is exactly who I've been looking for." Here’s the exact 5 things I changed to elevate my positioning and attract better customers: 1. Be Obsessively Specific In Your Content The more clearly you describe your ideal client's exact situation, the more premium buyers think, "this person gets me." What you're saying should repel anyone who's not the perfect fit. 2. Feature The Best Clients You've Already Worked With Premium buyers look at who else is in the room. If your testimonials or case studies feature the wrong clients, that's who shows up next. Showcase the work you want more of. The room fills accordingly. 3. Price Like You're Trying To Impress Someone A low price doesn't attract more clients. It just attracts a different kind. Premium buyers use price as a quality signal before they read a single word of your copy. The price is a huge part of your brand. Set it like you mean it. 4. Let Your Content Do The Qualifying Every post should make the right people lean in, and the wrong people keep scrolling. What can you say that would make the right customers hungry for more? What would make the wrong customers unsubscribe or click away immediately? The right people will reach out already sold, already trusting, and already agreed to your price. 5. Stop Writing For Everyone Premium buyers pay more to feel certain they've found the right solution. Write content that makes them feel understood before they've spoken to you. The premium positioning makes it an easy yes. Stop chasing volume. Start attracting premium buyers who see your price and think: "Finally, someone who gets it." __ Feel like you’re attracting the wrong customers? Most founders think attracting better customers means getting better at sales. But the clients you attract are a direct reflection of the signals your brand puts out. Comment ‘Pricing’ and I'll send you my Pricing Psychology Playbook. It’s the exact framework we use to attract premium buyers at Founder OS.

Selling to ENT without changing your pricing model is like showing up to a black-tie event in flip flops. MM pricing models don’t survive in enterprise sales. Why? Because selling 1,000 licenses to an enterprise isn’t 20x harder than selling 50 - but if you don’t adjust your pricing strategy, it will be 20x more painful. Enterprise buyers don’t think in per user terms. They think in budgets, forecasts, and cost centers. They want predictability, not a CPQ nightmare where they’re adjusting seat counts every quarter. If you’re moving upmarket, here’s how to avoid looking like a tourist at the grown-ups’ table: 1. Kill per-user pricing for large accounts. Enterprise CFOs see per-user models as a ticking time bomb...every new hire adds cost. Instead, sell in committed tiers, annual volume contracts, or all-you-can-eat licenses. - Instead of “$50 per user, per month,” structure it as, “$X for up to 1,000 users.” - Price for usage, not headcount - think storage, API calls, transactions, etc. 2. Enterprise doesn’t “expand naturally.” Build in expansion from day one. For MM, you can land small and grow. Enterprise doesn’t work that way. - Ramp pricing: Year 1 at 60%, Year 2 at 80%, Year 3 at 100%. Predictable growth, no CFO freak-outs. - Auto-expansion clauses: If usage exceeds X%, licenses auto-scale. Protects you from procurement pulling a “we’ll just add seats later” stunt. 3. Enterprise buyers expect to “win.” Give them a win - without losing. These buyers are trained to negotiate. They want a lower per-unit cost, but they’ll commit bigger dollars to get it. - Introduce an ENT Rate...lower per-unit cost, but higher minimum commit. CFOs love “efficiency,” and you get more ARR locked in. - Structure custom packaging that makes them feel special. Limited access to beta features, priority support, or bundled services. Want to win in enterprise? Stop selling like an SMB rep. Price for scale, control the expansion, and let procurement “win” on terms that make your CFO smile.

Aging inventory is one of the biggest bottlenecks for retail brands. Here's how we solved this problem and made $10M+ on clearance items... The reality of retail is that every brand struggles with aging inventory. Most companies just slash prices, damaging their brand and sacrificing margins. At Culture Kings, we pioneered the concept of the mystery box instead. Here's how it worked: Every year, we'd make a killing on the slowest month in retail, February. We'd run our Mystery Box promotion: 3 items for $50. Seems simple, but there was serious psychology behind it. The key was to avoid bundling clearance items. Here's what we did instead: We engineered the Mystery Box with a specific formula: 2 items specifically created for the promotion + 1 clearance item we needed to move This is where 99% of retailers got it wrong. Most brands just bundle unsold items and hope for the best. But the fact is, clearance items didn't sell for a reason. Instead, you need to find a way to keep trust, but also maintain your margins. We deliberately created products just for these promotions. Items that: • Had high perceived value • Matched our brand aesthetic • But were inexpensive to produce The math was simple: Clearance item: Cost $5 (Retail $30) Engineered item #1: Cost $5 (Perceived value $30) Engineered item #2: Cost $5 (Perceived value $30) Total cost: $15 Selling price: $50 Customer perceived value: $90+ This approach solved multiple problems: • Cleared aging inventory without brand damage • Generated healthy margins even during clearance • Customers felt they got a great deal • Built anticipation and excitement around our "sale" events The Mystery Box concept became so popular, that customers would line up for them. We turned a traditional loss-leader (clearance) into a profit center AND a marketing tool. The big lesson: Don't just discount when clearing inventory. Engineer a customer experience where they feel they're getting tremendous value, while you achieve your inventory goals. This strategy scaled to millions in revenue during traditionally slow retail months. PS: Founders, I broke down the 5 biggest mistakes that kept my business from scaling to 8, then 9 figures. If you want to learn how to avoid them, sign up here: https://lnkd.in/eCY_2KQx

This peak season, protect your margins by controlling discount stacking. As we approach peak trade and the peak discounting period, brands often default to the bluntest tool in the box: heavy sitewide sales. The logic is simple “drop the price, drive volume, clear stock.” But too many brands forget one crucial detail: stacking discounts can quickly turn profitable orders into loss-making ones. The Overlooked Discounts: Sitewide promotions don’t operate in isolation. Sitting in the background are your: High-intent pop-ups Welcome series discounts Cart abandonment flow incentives These are designed to capture incremental conversions in normal trading periods. But when layered on top of aggressive sitewide offers, they often wipe out already-thin margins. A Quick Example: RRP: $100 Sitewide discount: 30% → Sale price = $70 Product cost (COGS): $20 Customer acquisition cost (CAC): $30 Shipping / merchant / pick & pack costs: $15 At this stage: Revenue: $70 Costs: $20 + $30 + $15 = $65 Profit: $5 per order (5% margin) Not great, but still positive. Now add in an additional 20% discount from a pop-up or triggered flow: Extra discount: 20% off $70 = -$14 Adjusted sale price = $56 Recalculate: Revenue: $56 Costs: $65 🛑 Net loss: -$9 per order Why It Matters At scale, these “hidden discounts” mean businesses spend thousands acquiring customers and fulfilling orders at a negative contribution margin. Instead of driving growth, they quietly erode cashflow and profitability during the most critical sales period of the year. How to Avoid This Trap: Audit your flows before peak trade. Adjust high-intent pop-ups, welcome offers, and cart abandonment discounts during sitewide promotions. Set a CAC ceiling. Ensure that even with discounts applied, your contribution margin remains positive. Model scenarios. Calculate “worst case” blended discounts and costs before launching campaigns. Use AI or rules-based systems. Automate safeguards so discounts can’t stack beyond a certain threshold. Discounting can be a powerful lever, but unmanaged, it becomes a profit killer. You may risk turning your busiest period into your least profitable one.

Pricing shouldn’t feel like a fight. It should feel like a fair conversation between adults who both want the relationship to last. When costs keep rising and margins start to feel thin, the worst thing we can do is spring a surprise increase and hope customers accept it. The better path is to make small, evidence-based adjustments that people can understand, and to do it with enough notice that trust grows rather than erodes. Here’s how I guide teams through it... We set a simple rule first: price reviews happen on a predictable cadence, anchored to a sensible index, and capped so there are no surprises. Then we give customers a choice. A clear Good / Better / Best set of tiers lets people pick the value that fits, and it means we stop discounting just to “make it work.” For loyal customers, we start with a grace period and then move in small, scheduled steps. It’s respectful, and it smooths cash flow for everyone. We also swap blanket discounts for an early-pay credit that protects the list price while bringing cash forward. We add a few fair boundaries so small, urgent, or high-touch work is priced to match the effort. Where costs have increased in one part of the service, we re-bundle so value is obvious and buyers are never misled. And when it’s time to talk, we keep the message short and human: here’s what changed in our input costs, here’s the adjustment we’re making, and here’s what stays the same in terms of quality and scope. If you track a few signals for 30 days, you’ll see better results like: most eligible accounts receive the scheduled uplift, the overall discount rate falls, more invoices are paid early, average revenue per customer increases, and churn and NPS hold steady. The goal is pricing that is predictable, and defensible. Think caliper, not hammer, with measured moves that protect margin and maintain customer goodwill. How do you explain price changes to customers without losing trust? ------- ➕ Follow Jonathan Maharaj FCPA for finance‑leadership clarity. 🔄 Share this insight with a decision‑maker. 📰 Get deeper breakdowns in Financial Freedom, my free newsletter: https://lnkd.in/gYHdNYzj 📆 Ready to work together? Book your Clarity Session: https://lnkd.in/gyiqCWV2