Copyright Fast Company
Pricing is often treated like a simple equation: Calculate your costs, add a margin, and set a number. That approach might keep the lights on, but it ignores what pricing really represents. Pricing is a financial calculation and a message. It tells customers what you believe your product is worth, where you fit in the market, and how you expect them to respond. Despite its importance, many companies still rely on guesswork. They copy competitors, use legacy formulas, or trust intuition. At Revenue Management Labs (RML), we see the risks of this approach every day. Prices set without a strategy create confusion, erode margins, and weaken brand trust. The good news is that there is a better way. The companies that excel at pricing don’t simply look at spreadsheets. They ask sharper questions before making decisions. By interrogating assumptions, leaders can transform pricing from a gamble into a deliberate growth strategy. Subscribe to the Daily newsletter.Fast Company's trending stories delivered to you every day Privacy Policy | Fast Company Newsletters Here are five questions every business should ask before setting a price. 1. What value do I deliver to the customer? The first question forces a shift in perspective. Too often, businesses price based on internal costs or features. Customers, however, don’t care about how much it costs you to build the product or how many add-ons you’ve developed. They care about the outcome your product delivers. Consider a data analytics firm that charges by the number of user seats. From their perspective, the logic was sound. More users meant higher costs and more revenue potential. Yet clients cared more about the insights that improved campaign performance. The real value was not in the number of accounts, but how those insights lifted revenue and efficiency. RML helped the firm reframe its model around campaigns and measurable outcomes. By linking pricing to results, customers felt the model aligned with their goals. Spending more meant achieving more. The company saw upsells grow, retention improve, and trust strengthen. Lesson: Price according to outcomes and impact, not inputs and cost. 2. Who is my customer and what do they care about? No two customer segments are alike. Yet many businesses set a single price for everyone, which means it doesn’t fit anyone particularly well. Segmentation is fundamental to pricing. One healthcare provider offered the same package to both small clinics and large hospitals. Clinics wanted affordability and basic features. Hospitals valued compliance, reliability, and high-touch service. By creating two tailored tracks, the provider met both needs. Clinics had a lean, budget-friendly option. Hospitals received a premium service tier at a higher price. Stronger relationships resulted across the board. Clinics felt respected for their constraints, while hospitals felt reassured by the emphasis on reliability. Margins improved because pricing matched what each group valued most. Lesson: Identify what matters to each segment. Price in a way that reflects those priorities. 3. Does my pricing reflect my brand promise? Pricing is not just math—it is marketing. Long before customers test your product, your price signals whether you are positioned as budget, mid-market, or premium. When pricing and brand positioning clash, credibility erodes. An equipment supplier we advised marketed itself as premium. Its materials emphasized durability, innovation, and reliability. Yet its prices were set at mid-market levels. Customers assumed the lower price meant lower quality. Its numbers undermined the company’s own messaging. When leadership agreed to test higher prices, the story changed. Customers began to associate the product with its intended positioning. Perception shifted, and profit margins grew by 15%. The higher price supported the brand rather than contradicting it. advertisement Lesson: Pricing is a story. Make sure it tells the same story as your brand. 4. What alternatives will my customer consider? Customers weigh your price against direct competitors, substitutes, and even the option of doing nothing. Ignoring this context is a fast way to lose deals. A SaaS company discovered this the hard way. Despite offering a strong product, they lost business to rivals with flexible billing. Their SaaS company’s contracts required annual commitments, while competitors offered monthly plans. The barrier was the rigidity. RML worked with the company to introduce a month-to-month plan at a slightly higher per-unit cost. Customers who disliked lock-ins now had an entry point, while annual contracts remained attractive for committed buyers. The company won back market share without undermining its larger deals. Lesson: Always ask, “What else could my customer choose?” Pricing should make your offer the most compelling in context. 5. How will I know if this price is working? Don’t celebrate short-term revenue spikes without asking whether they are sustainable. True pricing success is measured across multiple dimensions of revenue, margins, churn, and lifetime value. One manufacturer raised prices and initially celebrated stronger revenues. But within months, customer attrition began climbing. The company had measured the short-term win but missed the longer-term warning signs. By redefining success, the company gained clarity. RML helped establish metrics across revenue per customer, retention rates, and net dollar retention. Tracking these quarterly showed where adjustments were needed. Pricing strategy became a living process, not a one-time decision. Lesson: Define success before you launch. Measure more than revenue. Final thoughts Guesswork has no place in pricing. Pricing must reflect the value you deliver, the segments you serve, the story your brand tells, the alternatives customers consider, and the metrics defining success. By asking these five questions, leaders can strip uncertainty out of pricing. They can transform it from a rushed calculation into a deliberate strategy that reinforces brand, aligns with customer expectations, and drives sustainable growth. When businesses take the guesswork out of pricing, they do more than protect margins. They earn customer trust, strengthen positioning, and create long-term value.
