| name | pricing-model-selection |
| description | Choose the pricing model — subscription, per-seat, usage/consumption, tiered, flat-rate, freemium, or hybrid — by tracing the value of the product against consumption variance and acquisition needs. Reach for this when a product needs its first model, when a per-seat model is capping growth, or when an AI/usage-cost feature breaks the existing model. Pairs with value-metric-design (decide the metric alongside the model). |
Skill: Pricing-Model Selection
The pricing model is how the customer is charged. It is downstream of the value
metric (what you charge per) — so sketch the metric (see value-metric-design)
before locking the model. This skill traces a product to its best-fit model and
names the runner-up.
Step 0 — One opinion up front
Hybrid is the default answer for anything consumption-driven. A committed base
fee + an included allowance + metered overage gives the vendor a revenue floor and
the customer a predictable bill while still aligning price with value at the margin.
Reach for a pure model only when the product is genuinely simple (flat capability,
predictable use) or genuinely metered (clean per-event value).
Step 1 — Characterize the value delivery
Answer three questions:
- Is value continuous (ongoing) or one-time/episodic? Continuous → subscription
family; episodic → transactional; one-time → perpetual + maintenance.
- How much does consumption vary across customers? Low variance → seat or
flat/tiered; high variance → usage or hybrid.
- Does value scale with the number of people, or with the capability itself?
People → per-seat; capability → flat-rate/tiered.
Step 2 — Run the model-selection tree
Traverse ../../knowledge/pricing-decision-trees.md §1
to a leaf. Record the path you took.
Step 3 — Apply the model-specific cautions
- Per-seat: caps at seat count and can penalize adoption (teams ration logins).
If AI does the work, per-seat shrinks the account as the product succeeds — reconsider.
- Usage-based: bill-shock risk + unpredictable revenue. Add an included allowance,
caps, and usage alerts; consider the hybrid instead.
- Freemium: a model only with a measured conversion path AND a bounded
cost-to-serve. Absent either, use a time-boxed free trial.
- Hybrid: size the included allowance to the median customer; price overage to be
felt but not punitive.
Step 4 — Stress-test against the failure question
Ask: "If this product becomes 10× more valuable to the customer, does our revenue
grow with it?" If the model says no, you've picked a metric/model that caps the
company — go back to Step 1.
Step 5 — Hand off
- The dollar impact (LTV, margin, cash) of the chosen model →
finance.
- The value metric decision →
value-metric-design (do it alongside, not after).
- WTP validation of the price points the model implies →
willingness-to-pay-research.
Output
A model recommendation with: the tree path, the runner-up and why it lost, the
model-specific cautions that apply, and the failure-question check.
