prd-v03-pricing-model

# Pricing Model Selection

Position in HORIZON workflow: v0.2 Product Type Classification → **v0.3 Pricing Model Selection** → v0.3 Moat Articulation

## Consumes

This skill requires prior work from v0.2-v0.3:

- **BR-\* product type entry** (from Product Type Classification) — Determines which pricing model makes sense
- **CFD-\* competitive intelligence entries** (from Competitive Landscape Mapping) — Competitor pricing, WTP signals
- **BR-\* moat entries** (from Moat Definition, parallel v0.3 work) — Price as potential moat element
- **KPI-\* outcome entries** (from Outcome Definition, parallel v0.3 work) — Success metrics tied to pricing
- **Cost structure estimates** (from own analysis) — Unit economics to validate price floors

This skill assumes v0.2 competitive analysis is complete and product type is defined.

## Produces

This skill creates/updates:

- **BR-PRC-\* entries** (pricing constraints) — Rules governing price floors, ceilings, discounts
- **BR-PKG-\* entries** (packaging rules) — Tier boundaries and feature gates
- **BR-CMP-\* entries** (competitive positioning) — Price anchor targets and undercut thresholds
- **Pricing model artifact** — Named decision: "We will use [Model] because [evidence]" with tier definitions

All BR pricing entries should include:
- `confidence: 2-3/5` (based on WTP evidence tier and competitor benchmarks, not assumptions)
- Evidence source (competitor pricing, customer interviews, cost structure)
- Forward target: "Would move to 4/5 if real customers validate WTP"

Example pricing rule entry:
```markdown
BR-PRC-001: Entry Price Floor

Rule: Entry tier never below $15/mo (annual) or $19/mo (monthly)
Confidence: 2/5 (source: CAC-estimate + competitor-benchmarks)
Rationale: Below $15/mo, CAC payback exceeds 6 months, unsustainable
Enforcement: Stripe product configuration, pricing page, contract templates
Evidence:
  - CFD-042 (competitor pricing): Similar tools start at $15-25/mo
  - KPI-001 (outcome): CAC estimate $45, need 3-month payback = $15/mo minimum
Enforcement: Set in Stripe, document in pricing page, enforce in sales contracts
Exception: Founding customer 50% discount (must be approved by founder)
Next Target: "Would move to 4/5 if 5+ paying customers validate willingness at $15/mo"

---

BR-CMP-002: Competitive Undercut Threshold

Rule: Maintain ≥50% savings vs [Competitor Name] at SMB level (5 users)
Confidence: 3/5 (source: competitor-pricing + 2-SMB-interviews)
Rationale: Price advantage is core differentiator for SMB segment (per product type: UNDERCUT)
Enforcement: Quarterly competitive price audit; triggers price review if competitor drops
Evidence:
  - BR-001 (product type: Undercut)
  - CFD-015 (value hypothesis): SMB would save $12,500/year at target price
  - CFD-042 (competitor pricing): Competitor at $30/user/mo = $1,800/year for SMB
Exception: If competitor drops price, floor (BR-PRC-001) takes precedence
Next Target: "Would move to 4/5 if SMB cohort pays premium for our service over incumbent"
```

## Core Principle

**Pricing follows value timing**: When and how customers receive value determines the pricing model. Don't copy competitors without understanding their value delivery pattern.

## Pricing Model × Product Type Matrix

| Product Type | Typical Model | Why It Fits | Anti-Model (Avoid) |
|--------------|---------------|-------------|-------------------|
| **Fast Follow** | Match market structure | Users expect familiar pricing | Premium positioning (no differentiation) |
| **Undercut** | Flat rate, aggressive discount | Price IS the value prop | Per-user (negates savings) |
| **Clone** | Parity or slight discount | Must compete on terms users know | Innovation pricing (confuses buyers) |
| **Slice** | Usage-based or ecosystem-tied | Value tied to platform activity | Flat fee (misaligned with usage) |
| **Wrapper** | Per-integration or usage | Value = connections made | Per-seat (value isn't user count) |
| **Innovation** | Value-based, potentially premium | Funds education, signals quality | Race to bottom (devalues category) |

## Value Timing → Model Selection

Ask: **When does the customer get value?**

| Value Pattern | Recommended Model | Examples |
|---------------|-------------------|----------|
| Continuous recurring | Subscription (monthly/annual) | SaaS tools used daily |
| Per-transaction | Usage-based | API calls, exports, generations |
| One-time outcome | One-time fee or lifetime | Logo design, course completion |
| Milestone-based | Tiered + upsell triggers | Features unlock as needs grow |

## Competitive Anchoring Decision Tree

```
1. Do competitors use per-user pricing?
   ├─ YES → Calculate "SMB penalty" (5-user annual cost)
   │   └─ Flat pricing at 50%+ savings = strong positioning
   └─ NO → Match model, differentiate on value/features

2. Is competitor pricing transparent?
   ├─ YES (Tier 1) → Use as direct anchor
   └─ NO ("Contact sales") → Find proxy or G2/Capterra estimates

3. Should we undercut, match, or go premium?
   ├─ Undercut: When we're simpler/niche and can sustain margins
   ├─ Match: When competing on features, not price
   └─ Premium: Only with clear, provable differentiation
```

## SMB Penalty Calculation

Per-user pricing penalizes SMBs with larger teams. Calculate the arbitrage:

```
Competitor: $30/user/mo
SMB with 5 users: $30 × 5 × 12 = $1,800/year

Our flat rate: $99/year
Savings: ($1,800 - $99) / $1,800 = 94%
Headline: "94% less than [Competitor] for teams of 5"
```

**Rule**: If savings exceed 70%, lead with price in positioning.

## WTP Validation Hierarchy

| Tier | Method | Confidence | When to Use |
|------|--------|------------|-------------|
| **1 (Highest)** | Actual purchase, payment collected | 95%+ | Post-MVP, real customers |
| **2** | Pre-order, payment intent, trial→paid | 70-85% | Landing page tests |
| **3** | Email signup at stated price | 50-65% | Smoke tests |
| **4** | Survey, interview ("would you pay X?") | 25-40% | Early exploration only