Set your price from expected value

What it does

Founders price off cost, off a competitor, or off a number that felt brave two years ago. Buyers don’t pay on any of those. They pay on expected value: the value of the outcome, times how certain they are they’ll get it. Price at about a tenth of that, and the buyer is looking at a tenfold return, which is an easy yes. It’s the cheapest letter to move: no new leads needed.

What you need

• Notes or recordings from calls with five to ten happy customers
• What each of those customers got: hours saved, revenue added, costs avoided
• Your case studies, references and any guarantee you offer

How it works

1. 1

   Put a yearly number on the outcome

   For a typical customer in one segment, what is the result worth a year? Hours saved times what those hours cost, revenue added, or costs avoided. Use what customers told you, not what your website says.

   Prompt for Claude or ChatGPT

   Here are notes and transcripts from calls with [NUMBER] of our customers in [SEGMENT].
   
   For each customer, pull out:
   - the result they describe, in their own words, with any numbers they gave
   - what that result is worth to them a year, if they said or implied it, showing how you got there
   
   Then give me the typical yearly value for this segment, a low case and a high case. Only use numbers the customers gave. If a customer gave no number, say so instead of estimating.

2. 2

   Estimate how certain a buyer is

   Certainty is how sure a new buyer is that they’ll get that result. It goes up with case studies in their segment, references they can call, a pilot and a guarantee. With two case studies, a buyer might put the odds near 40%. With nine, closer to 80%. Be honest: this is a judgment, so write down why you picked the number.

3. 3

   Work out the expected value and the price

   Google Sheets: paste into A1

   Yearly value of the outcome	150000
   Buyer's certainty they'll get it	40%
   Expected value	=B1*B2
   Price at a tenth of expected value	=B3/10

4. 4

   List what would raise certainty

   Every case study, reference, pilot or guarantee raises certainty, and each one is a price increase waiting to happen. Write down the next two you could add this quarter.

5. 5

   Test the new price on new deals only

   Quote it to new buyers in one segment and watch the win rate over the next 20 to 50 pitches. Existing customers keep their price until renewal, if you change it at all.

What good looks like

A price you can explain in one sentence (“you save about $150K a year, so this pays back many times over”) and a list of what would raise it next.

Mistakes to skip

• Pricing off a competitor. Your price falls the moment someone promises the same outcome, with the same odds, for less.
• Putting a number on value that no customer ever said. If they can’t say it, they won’t pay for it.
• Raising price everywhere at once. Change it in one segment, measure the win rate, then roll it out.