mrpink essays

The Pricing Operating System (Part II)

From theory to practice: how to run pricing without losing focus or identity.

In Part I we looked at pricing through the lens of microeconomics: willingness to pay, demand curves, consumer surplus, and Total LTV. But theory is just the beginning. The real challenge for founders is operational: running pricing day to day without drifting into chaos, diluting the value proposition, or confusing customers.

The temptation of feature creep

When growth pressure builds, the easy move is: “let’s add one more feature to justify the price.” It’s a trap. In no time, you stop building a product and start assembling a Frankenstein that’s hard to maintain.

A simple filter is the 2-out-of-3 rule: a new feature only ships if it meets at least two of these conditions:

1- Increases willingness to pay for your target segment.
2- Strengthens your positioning in the customer’s mind.
3- Doesn’t add significant maintenance cost.

If not, the answer is NO. Put it in the parking lot and offer alternatives (integrations, partners, APIs). Saying no also builds your brand.

The healthy mix across plans

A well-designed GBB isn’t just theory—you need to watch the actual distribution of customers across plans. A healthy mix usually looks like:

- 15–30% in Good
- 50–65% in Better (your core)
- 15–25% in Best

If fewer than 10% choose Best, the value jump is unclear or fences don’t exist.

If more than 35% choose Best, it doesn’t mean it’s “bad,” but it may signal that your current Best is actually just a stronger Better. In that case, rethink your segmentation: reframe today’s Best as Better, and design a new Best for customers with the most complex needs and highest WTP. It’s another way of “skimming the market,” just as we saw in Part I, but with an additional step to better separate segments.

How to calibrate this mix? Through controlled experiments:

- Adjust usage limits.
- Move certain features (e.g. advanced security, analytics) between plans.
- Use in-product nudges that invite an upgrade when value thresholds are reached.

Always with new cohorts—never by forcing existing customers.

Learn from the top, package down

The Best plan reveals the sharpest pains: security, audits, critical integrations, latency, permissions. But the point isn’t just to solve them there—it’s to distill those learnings into modules that eventually cascade into Better.

Each quarter ask yourself: what are we seeing in Best that should become accessible value for the base? Discipline means packaging without sliding into custom one-offs.

Promotions that retain without eroding brand

Everyone wants lower churn, but careless discounts are poison: they erode WTP and anchor your brand down. Promotions should always have clear fences:

- Save offer: a free month in exchange for an annual commitment.
- Win-back: re-entry with onboarding or migration services, not permanent discounts.
- Temporary bonuses: time-limited upgrades so customers try higher plans and feel the value.

Always bounded by time and conditions. Never perpetual coupons.

Price as a signal

Price doesn’t just capture value—it positions your product in the customer’s mind. Too low and you sound like a toy; too high and you set expectations you may not meet.

Three quick signals to review your pricing:

- If your win rate > 50% without price objections, you’re probably underpriced.
- If enterprise deals collapse before security or compliance, you may be positioned too low.
- If your average annual ticket is over $1k, freemium likely dilutes your value: a guided trial works better.

Closing

Pricing is not an event—it’s an operating system. Every decision on features, plan mix, promotions, or base price is building (or eroding) your positioning.

In Part I we saw how microeconomics helps us understand willingness to pay, consumer surplus, and Total LTV. In this Part II we dove into operations: how to avoid drift, keep focus, and use pricing as a strategic positioning lever.

Ultimately, running pricing means running your startup’s identity.