Pricing is a System, Not a Number

huangpf
Jan 17
3 min read

During SQ Collective's Stage session this week, which is a part of our co-working Friday:

"The bad news is no one knows about their pricing. The good news is there's a way to think about it."

Mohammed Sebti, former Simon-Kucher consultant turned startup mentor, dropped truth bombs at our recent Stage session on Pricing Strategy.

Here's the reality for most of us building products: We guess. We look at a competitor, undercut them by 10%, and pray. Or we take our costs, add a margin, and call it a day.

Sebti calls this the "cost-plus" trap, and it’s killing your growth. Here’s what we learned about finding the sweet spot without going broke.

The "HR Assistant" Trap

Sebti shared a killer example about framing.

Imagine you’ve built an HR tool.

Founder 1 calls it an "HR Assistant" that helps with scheduling and screening. They charge $14/seat/month.
Founder 2 calls the exact same product an "AI Digital Worker" that replaces 20% of a recruiter's workload. They charge $1,000/month plus a success fee.

Same code. Different story. 70x price difference.

The lesson? Your price isn't just a number; it's a signal of value. If you pitch yourself as a "productivity tool," you're competing with a $10 SaaS subscription. If you pitch yourself as an outcome—like replacing a hire—you’re competing with a $60k salary.

Stop Starting with "How Much?"

Most of us start pricing discussions with "Should we charge $20 or $50?" That’s the wrong question.

Sebti laid out a strategic hierarchy you need to follow:

The What (Packaging): How do you bundle it? Good/Better/Best? Platform + Add-ons?
The How (Metric): What do they pay for? Per user? Per outcome? Usage-based pricing is eating the world, especially in AI.
The How Much (Price Level): Only once you know the first two do you set the number.

If you don't know what you're selling (the package) or how you're charging (the metric), the number is meaningless.

The "Too Expensive" Question

How do you find that number? Stop asking "What would you pay for this?"

People lie. They want to be nice.

Instead, use the Van Westendorp Price Sensitivity Meter approach. Ask these questions:

At what price is this so cheap you'd doubt its quality?
At what price is it expensive, but you'd still consider it?
At what price is it too expensive to even consider?

This gives you a range—a "sweet spot"—rather than a single, made-up number.

It’s Not Set in Stone

Look at OpenAI. In 2020, it was just APIs. Then came ChatGPT (free), then Plus ($20/mo), then Enterprise, and now Pro ($200/mo).

Pricing is a journey. You will get it wrong at first. The goal isn't to be perfect; it's to be directionally correct and then iterate based on willingness to pay.

Try This Today

Don't overthink a complex conjoint analysis. Go talk to 5 potential users this week.

Pitch the value, not the features.
Ask the "Too Expensive" question.
Test one packaging change. If you're doing per-seat, what would per-outcome look like?

Ship the messy pricing model. You can always change it later. In fact, you should change it later.

Your turn. What’s your "HR Digital Worker" pitch?

These conversations happen every Friday at SQ Collective.

Usually over laptops. Sometimes over pizza.

You’re welcome to join the next one.