Price the Outcome, Not the Effort

Task

Create standard pricing and packaging.

Summary

Create standard packaging that reflects value and boundaries rather than rebuilding a labor estimate for every deal.

Create Pricing and Packages That Can Be Sold Repeatedly

Task ID: S2-03

Standard pricing and packaging turn a service from a custom proposal into a repeatable buying and delivery decision. This article explains how to design pilot, core, and premium options; set prices using cost, customer value, and alternatives; define annual contract value clearly; and determine whether the offer is ready for repeatable direct sales.

The price list is not the offer

A company often reaches this point with several successful customers but no dependable way to quote the next one.

One customer bought an assessment. Another received implementation, training, and support. A third negotiated extra reporting, more meetings, and unlimited revisions. The invoices may all carry the same service name, but the company is actually selling different work each time.

That creates several problems at once:

• Sales cannot explain the offer without consulting the founder.
• Delivery cannot estimate the required time before the contract is signed.
• Finance cannot compare margin across customers.
• Customers cannot easily tell what is included, what costs extra, or which option fits them.
• Every negotiation becomes a fresh design exercise.

A pricing grid does not solve those problems by itself. The company can put three names and three prices on a page while leaving scope, delivery effort, and commercial terms ambiguous.

The real task is to standardize the buying decision and the delivery promise. Pricing is the amount charged. Packaging defines what the customer receives, for whom, under what conditions, with which limits, and for what expected result.

That distinction matters because a repeatable offer must work in two directions. It must be easy for the customer to understand and buy, and it must be practical for the company to deliver at a predictable cost.

The operating principle

A useful operating principle is:

Define a standard result, scope, customer, delivery method, and set of limits before choosing the final price.

The order matters. A price cannot be evaluated properly when the work beneath it is still undefined.

A standard package should answer the following questions without requiring a private explanation from the founder:

• Who is this option for?
• What problem does it address?
• What result should the customer expect?
• What work is included?
• What is explicitly excluded?
• What information, access, and participation must the customer provide?
• How long does the work or contract last?
• How is the customer charged?
• What causes the price to increase?
• What support, response time, and review cadence are included?
• What happens when the customer requests work outside the package?

Pricing research supports using more than one point of reference. Cost-plus pricing can establish whether the offer is financially viable, competitor research can reveal the alternatives a buyer will compare, and value-based pricing can reflect the economic or operational importance of the result. Each method also has limits when used alone. Cost-plus pricing can ignore customer value, while competitor-led pricing can copy another company’s cost structure or positioning rather than reflect your own.

A cross-sectional study of 1,812 pricing professionals found a positive relationship between value-based pricing, pricing capabilities, and firm performance, while it did not find the same relationship for competition-based pricing. That evidence is useful but should not be treated as proof that value-based pricing automatically causes better performance: the study measured associations among companies with different capabilities and circumstances. The practical lesson is to understand customer value without abandoning cost and market evidence.

Standard packages also reduce the number of decisions a buyer must make. Research on choice overload does not show that more options are always harmful. It finds that overload becomes more likely when the choice is complex, the buyer is uncertain about preferences, the decision is difficult, or the buyer wants to minimize effort. Those conditions frequently appear in business-to-business service purchases, where several people may need to compare scope, risk, timing, and price.

Three options are therefore a practical starting structure, not a universal law. Research on “extremeness aversion” finds that buyers often choose a middle option, but the strength of that effect varies materially by product, attributes, and research design. The core package must stand on its own rather than depend on a weak pilot or an inflated premium option to make it appear attractive.

Build the three packages around different customer situations

A pilot, core, and premium structure works best when each package corresponds to a legitimate buying situation.

The packages should not be three arbitrary amounts of labour. They should make different promises, impose different limits, or address different levels of customer need.

The pilot should buy evidence, not cheap labour

A pilot is useful when the customer faces genuine uncertainty that can be resolved through limited use. Its purpose is to answer a question, such as whether the service can reduce a particular delay, produce an acceptable analysis, integrate with one system, or work for one team.

A credible pilot has:

• a qualified customer that could buy the full offer;
• a narrow and representative use case;
• measurable success criteria;
• a fixed start and end;
• a named customer owner;
• the data and access required to complete the work;
• a predetermined conversion decision;
• a price high enough to discourage curiosity projects with no buying intent.

A pilot should not quietly contain most of the core package at a fraction of the price. That trains customers to delay the full purchase and forces the company to deliver expensive work before confirming commercial commitment.

Nor does every offer need a pilot. It may add unnecessary friction when the purchase is low risk, the result is easy to understand, implementation is routine, or comparable customers have already provided adequate proof.

The core package should be the default delivery system

The core package is the most important option because it represents the offer the company expects to sell and deliver most often.

It should contain everything required to achieve the main promise for the target customer. A customer should not need a series of surprise add-ons merely to obtain the advertised result.

The core package should be specific about quantities and responsibilities. “Implementation included” is vague. A repeatable package might instead define the number of workflows configured, systems connected, employee groups trained, reports produced, review meetings held, and revisions allowed.

These limits are not merely sales terms. They are delivery controls. They allow the company to estimate labour, schedule work, assign employees, automate repeated steps, and compare actual effort against the original assumptions.

The premium package should address higher need, not unlimited preference

Premium pricing is justified when a customer requires something that creates more value, more work, more risk, or a stronger commitment from the provider.

Useful differences may include:

• more locations, business units, users, or data volume;
• accelerated onboarding or response;
• more integrations or migration work;
• enhanced security, compliance, or governance support;
• executive reporting;
• a named service lead;
• additional training;
• extended support hours;
• higher service levels;
• more frequent optimization or review.

“Unlimited” is usually a poor premium boundary for labour-intensive work. It removes the company’s ability to forecast cost and invites disagreement about what reasonable use means. A better premium package states a larger allowance, a clearer service level, or a method for pricing additional work.

Choose the charging unit carefully

The packages still need a price metric: the unit that causes a customer’s charge to change.

Possible metrics include a company, location, project, active user, employee population, workflow, transaction, record, report, managed asset, or measured unit of use.

A strong metric should rise reasonably with customer value, be understandable before purchase, and be measurable well enough that the customer can verify the bill. Stripe’s guidance for usage-based software similarly emphasizes that a metric should scale with value, be predictable before signup, and be clearly measurable; unpredictable or provider-controlled metrics can create confusion and bill shock.

For a productized service, the simplest workable metric is often better than the theoretically perfect one. A complicated usage formula may be economically precise but difficult to quote, audit, and explain. A flat package plus a small number of clearly priced capacity bands may be easier to operate.

The following flow shows how the main evidence should lead to the package design:

flowchart LR
    A[Target customer and problem] --> B[Standard result]
    B --> C[Repeated delivery work]
    C --> D[Cost and capacity limits]
    A --> E[Customer value and alternatives]
    D --> F[Package boundaries]
    E --> F
    F --> G[Pilot, core, and premium grid]
    G --> H[Live sales and delivery tests]
    H --> I[Revise scope, price, or terms]

In plain language: begin with the customer and result, determine what delivery repeatedly requires, set package boundaries using both cost and market evidence, and then improve the grid using real sales and delivery results.

A public example illustrates the principle without establishing a universal formula. As of August 1, 2026, Basecamp offered a free option, a per-user Pro package, and a fixed-price Pro Unlimited package. The core software capabilities remained broadly available across packages, while the commercial fences included project limits, storage, the charging unit, administrative controls, personal onboarding, support priority, payment methods, and trial length. This shows that packages do not always need to withhold the central product. They can distinguish customers by scale, administration, service, and buying preference.

Price from three reference points

A defensible price usually comes from three views considered together:

1. The cost floor: What must the company charge to deliver the package without destroying margin or capacity?
2. The customer value range: What financial, operational, risk, or strategic value can the package reasonably create for the target customer?
3. The alternative set: What will the customer compare with the offer, including competitors, internal staff, manual work, delaying the decision, or doing nothing?

These are not three prices to average mechanically. They reveal different constraints.

Establish the cost floor

For each package, calculate the expected direct cost of onboarding, delivery, support, third-party services, travel, quality assurance, and likely rework. For services, employee time should be costed at its fully burdened delivery cost rather than the employee’s wage alone.

A basic recurring-price floor can be expressed as:

The calculation does not determine the final market price. It tests whether the proposed scope and price can support the company’s financial requirement.

Gross margin should also not be confused with markup. Gross margin measures gross profit as a percentage of revenue. Markup measures the amount added as a percentage of cost. The same price and cost produce different percentages under the two calculations. Public small-business guidance from the Business Development Bank of Canada recommends calculating direct costs, cost of sales, overhead, break-even volume, and market conditions rather than choosing a markup in isolation.

Where the price customers will accept is below the required cost floor, the company has four main choices: reduce the scope, improve delivery efficiency, change the target customer, or stop selling that package. Calling the gap a “strategic discount” does not change the economics.

Estimate customer value

Customer value research should focus on the customer’s current situation rather than asking only, “What would you pay?”

Useful questions include:

• What is the customer doing now?
• What does the current approach cost in money and employee time?
• What delays, errors, risks, or missed opportunities result?
• Which result matters enough to receive budget?
• Who approves the purchase, and what evidence do they require?
• Which parts of the proposed service matter most?
• Which parts would not change the buying decision?
• What would the customer choose if this offer did not exist?
• What contract amount triggers additional approval, procurement, or legal review?

Interviews produce working hypotheses. They do not prove demand. The company should compare stated preferences with actual proposals, purchases, losses, discounts, renewal behaviour, and expansion.

Advanced research can use choice experiments or conjoint analysis to estimate how buyers trade price against package attributes. These methods can be useful when there is sufficient sample size and research skill, but willingness-to-pay results are sensitive to how cost levels and statistical models are specified. They should not create false precision.

Study the alternatives without copying them

Competitor research should compare more than headline prices.

Record:

• target customer;
• promised result;
• included quantities;
• setup or onboarding charges;
• recurring and usage charges;
• contract term;
• support level;
• implementation responsibility;
• limits and overages;
• cancellation and renewal terms;
• apparent points of differentiation.

A competitor’s lower price may reflect less work, a different customer segment, self-service onboarding, lower service levels, investor-supported acquisition spending, or a cost structure that the company cannot reproduce.

The relevant question is not, “How do we match this price?” It is, “What does the customer receive at this price, and why would the customer prefer our offer?”

Academic work on nonlinear business-to-business pricing reinforces the potential value of segmenting price schedules rather than charging every buyer the same unit rate. One study using data from an educational-services company estimated that an optimized nonlinear schedule could improve profit by at least 8.2% over linear pricing in that setting. The same study found that the optimized schedule captured only a small part of the theoretical maximum from perfect price discrimination. This is a useful warning: package differentiation can improve economics, but it does not eliminate customer heterogeneity or the need for judgment.

Convert the research into actual prices

For each package, the team should document:

• expected direct cost;
• target gross margin;
• proposed list price;
• approved price range;
• minimum permitted price;
• required approval for discounts;
• charging metric;
• included quantity;
• overage or expansion price;
• implementation fee;
• contract term;
• payment schedule;
• renewal rule;
• customer migration rule;
• assumptions still requiring validation.

The first prices are working decisions, not discoveries of a permanent “correct” number. A company with limited data should choose a defensible starting range and learn from controlled selling rather than disguise uncertainty with excessive decimal precision.

Evidence and measurement

The task is complete only when the company has a usable pricing system, not merely a presentation.

At minimum, credible evidence should include:

• a published internal pricing grid for pilot, core, and premium;
• a one-page scope description for each package;
• a cost and margin model;
• a competitor and alternative comparison;
• customer interview or buying evidence;
• standard proposal and order-form language;
• discount and exception rules;
• implementation, usage, and overage prices;
• a process for recording why deals are won, lost, discounted, or changed;
• an owner and review date for the pricing model.

Define contract value before setting a target

“ACV” is ambiguous. It may mean annual contract value or average contract value, and even public companies calculate annual contract value differently.

FICO’s 2025 annual report defined “ACV Bookings” as the average annualized value of qualifying software contracts signed during the period, included estimated future usage-based fees, and counted only contracts with an initial term of at least 24 months. An earlier public software filing defined annual contract value as 12 months of subscription, term licence, and maintenance value while excluding one-time professional services, development work, and perpetual licences.

Neither definition is inherently correct for every company. The lesson is that the target is meaningless until its calculation is written down.

For a service moving toward recurring revenue, a practical internal measurement policy is:

• Annual recurring contract value: the annualized value of committed recurring fees, plus only committed minimum usage charges.
• Total contract value: all committed fees over the full contract term.
• Implementation revenue: one-time setup or implementation fees, reported separately.
• Average annual contract value: total annual recurring contract value from the relevant contracts divided by the number of those contracts.
• Average project contract value: total contracted project fees divided by the number of project contracts.

Short pilots should normally be reported separately rather than annualized into the recurring measure. Annualizing a three-month pilot can make the apparent contract value look larger even though the customer has not made a one-year commitment.

The target should therefore state its population and period. For example:

Target average annual contract value for new core and premium customers signed during the fiscal year, excluding pilots, taxes, pass-through expenses, and one-time implementation fees.

A target ACV is a company planning assumption, not an industry benchmark. The suitable amount depends on the customer’s value and budget, sales effort, contract term, delivery cost, support burden, implementation complexity, expected discounting, retention, and the mix of core and premium sales.

The team should backsolve a preliminary target from the economics of the sales and delivery system, then test it against actual customer decisions.

Track the measures that explain the average

Average contract value alone can improve for the wrong reasons. One unusually large premium contract can raise the average while the core offer remains difficult to sell. The company therefore needs the measures behind the average.

For recurring packages, renewal, expansion, support effort, and time to first customer value should be added as the customer base matures.

An average contract value target should be accompanied by a package-mix assumption. A company expecting most customers to buy the core package and a smaller share to buy premium can calculate the expected weighted average before launch. It should then replace the assumed mix with actual results.

Complete the commercial and accounting details

The pricing grid should show every mandatory charge a buyer must pay, including setup, travel, required licences, minimum usage, and required support. For Canadian consumer transactions, the Competition Bureau states that an advertised price is misleading when it is unattainable because mandatory fixed non-government fees are added later. Even where a particular business-to-business transaction falls outside that consumer context, all-in price clarity reduces disputes and improves comparability.

Finance should also review how the packaged obligations affect revenue recognition. IFRS 15 requires a company to identify the promised goods or services in a contract and determine whether each is a distinct performance obligation. An upfront activity does not automatically represent a separately transferred service merely because the company charges a setup fee for it.

That accounting analysis does not determine the selling price, but it may affect contract wording, invoicing, revenue timing, and financial reporting.

Failure modes and judgment calls

Standard pricing and packaging often look complete before they are operationally useful.

The packages are feature lists without a customer difference

Adding more features to each column does not explain why a different customer should buy it.

A useful grid connects each option to a buyer situation, result, level of complexity, and delivery commitment. A buyer and salesperson should be able to explain the difference without reading every row.

The pilot becomes the normal offer

When most customers demand the pilot, one of three things may be happening:

• the core commitment is too risky;
• the sales team cannot explain the proof already available;
• the pilot is simply underpriced.

The response should not automatically be to sell more pilots. Examine what uncertainty customers are trying to resolve and whether the core package, contract terms, proof, or onboarding process needs to change.

The premium option contains unbounded work

Unlimited meetings, integrations, revisions, locations, reporting, or senior access can turn a premium contract into the lowest-margin package.

Premium should provide more, faster, broader, or more controlled service, but it still needs capacity limits and change rules.

Competitor prices replace customer research

Competitor pricing is evidence about the market, not evidence about the value of this offer to this customer.

Copying a competitor can cause the company to inherit a price designed for a different product, cost base, sales channel, or growth objective.

A pricing metric is accurate but impossible to understand

A charge based on internal processing points, proprietary credits, or technical events may map closely to cost while leaving the customer unable to predict the invoice.

When customers cannot connect the unit to their own activity and value, sales friction and billing disputes are likely. The metric may need a customer-facing allowance, cap, calculator, or simpler proxy.

Discounts are used to repair weak packaging

A discount may be appropriate for a longer commitment, lower service cost, limited scope, reference participation, or another genuine exchange.

A discount without a corresponding customer commitment teaches salespeople and customers that the list price is optional. Record the reason, amount, approver, and concession received for every material discount.

The target ACV hides poor delivery economics

A higher contract value does not guarantee a better business. Premium contracts can increase revenue while consuming disproportionate founder time, custom engineering, travel, or support.

Review contract value together with gross margin, delivery variance, exception rate, renewal, and founder dependence.

Three tiers are used when another structure fits better

Pilot, core, and premium are useful where customers differ in uncertainty, scope, complexity, or service requirements.

Another structure may be better when:

• there is only one narrow target customer and one standard result;
• usage varies much more than features or service;
• the product is a commodity;
• each customer must be priced through regulated procurement;
• outcomes are genuinely measurable and suitable for performance pricing;
• enterprise requirements are too irregular to place within a fixed premium boundary.

The objective is repeatability, not obedience to a three-column format.

The decision to make

The company is ready to depend on the pricing and packaging system when the same offer can move through sales and delivery without being rebuilt for each customer.

That means:

• the customer can identify the suitable package;
• sales can quote it without inventing scope;
• delivery can estimate effort and schedule resources;
• finance can explain the cost, margin, and contract-value calculations;
• mandatory charges and expansion rules are visible;
• pilots have explicit qualification and conversion rules;
• discounts and exceptions require documented reasons;
• actual wins, losses, delivery costs, and customer results feed the next pricing review.

The required result is not a permanently correct price. It is a controlled commercial model: a pricing grid with pilot, core, and premium options, a written definition of contract value, a working target based on the company’s economics, and enough evidence to decide whether the same offer can be sold and delivered repeatedly.

Sources

Primary and official sources

• Business Development Bank of Canada, “The 5 Most Common Pricing Strategies,” updated March 27, 2025.
• Business Development Bank of Canada, “How to Set the Right Price for Your Products or Services,” updated August 1, 2023.
• Basecamp, official pricing and package descriptions, accessed August 1, 2026.
• Stripe, “Usage-Based Pricing Strategy for SaaS,” updated April 7, 2026.
• Competition Bureau Canada, “Drip Pricing” and deceptive-marketing guidance.
• IFRS Foundation, guidance on identifying promised goods, services, and performance obligations under IFRS 15.
• FICO, fiscal 2025 annual report and definition of ACV Bookings.
• U.S. Securities and Exchange Commission filing defining annual contract value and excluding one-time professional services.

Open research

• Liozu, Stephan M., and Andreas Hinterhuber, “Pricing Orientation, Pricing Capabilities, and Firm Performance,” Management Decision, 2013.
• Chernev, Alexander, Ulf Böckenholt, and Joseph Goodman, “Choice Overload: A Conceptual Review and Meta-Analysis,” Journal of Consumer Psychology, 2015.
• Neumann, Nico, Ulf Böckenholt, and Ashish Sinha, “A Meta-Analysis of Extremeness Aversion,” Journal of Consumer Psychology, 2016.
• Ghili, Soheil, and Russ Yoon, “An Empirical Analysis of Optimal Nonlinear Pricing in Business-to-Business Markets,” working paper, 2023.
• Rowen, Donna, et al., “Calculating Willingness-to-Pay With Discrete Cost and Random Coefficients in Discrete Choice Experiments,” 2025.
• “How Does Cost Matter in Health-Care Discrete-Choice Experiments?”, open-access methodological research on the sensitivity of willingness-to-pay estimates.