── ── Cognitive bias
Pricing Strategy
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.
How it works
Run the Pricing Audit. Value-first, anchor, structure, frame, test.
1. Articulate value to the customer in customer units. Not "our software does X" but "saves them $50K/year in engineering-hours." If you cannot name the value in the customer's metric, pricing is guesswork. 2. Estimate WTP per segment. Use Van Westendorp Price Sensitivity Meter (4-question survey), conjoint analysis, or direct evidence from paid pilots (B2B — most reliable). 3. Choose an anchor. First price seen frames every subsequent price. Anchor high if defensibly justified; the high anchor lifts the entire tier structure. 4. Design the tier structure. 3 tiers (Starter / Pro / Enterprise): Starter makes Pro feel affordable; Enterprise anchors and captures top WTP; Pro is the target sweet spot. 5. Frame for loss aversion. "Save $X by paying annually" beats "monthly costs $Y more" ~30%. Money-back guarantee converts ~10–30% higher than free trial. Per-user vs. flat-fee: per-user for SMB, flat-fee captures more enterprise value. 6. Stress-test the anchor. Show prices to 5–10 target-segment buyers: "expensive but worth it?" / "too expensive?" / "I'd buy at this price." Adjust if segment reference point is materially below anchor. 7. Run a 60-day measurement. Track: conversion rate, upgrade rate (Starter → Pro), discount-request frequency, revenue per tier. High upgrade rate + low discount-request frequency = right structure.
When to use it
- user says 'how should we price this', 'we should just charge more', 'our competitors charge X', 'willingness to pay', 'anchor price', 'value-based pricing', 'freemium structure', setting a first price for a new product, considering a price increase and worried about churn, or needing to design tiered/usage-based pricing
When not to use it
When the decision is routine and reversible, applying a formal method costs more than it returns.
Worked example
De Beers and the Engagement Ring (1947 → ongoing)
A worked example of pricing as designed signal, not discovered cost. Primary-source documented in Edward Jay Epstein's 1982 Atlantic investigation.
Install this skill (free, MIT)
npx skills add deciqAI/knowledge-skills