---
name: "pricing_basics"
description: "Helps founders and freelancers set prices: cost-plus floors, value-based ceilings, price anchoring, good/better/best tiers, and small tests of willingness to pay. Triggers on: how should I price this, what do I charge, pricing strategy, pricing tiers, price anchoring, cost-plus vs value pricing."
metadata: { "includeInPrompt": true }
---

# Pricing Basics

## Purpose

Covers how to pick a real number to charge: the cost floor you cannot go under, the value ceiling a buyer will tolerate, tier structures, honest anchoring, and cheap tests of what people will pay. Does not cover enterprise negotiation, dynamic pricing software, or legal topics like price discrimination law. Built for founders and freelancers, not pricing analysts.

## Workflow

1. **Get the inputs.** Ask for: monthly fixed costs, hours per month worked on this, a reasonable hourly cost for that labor, expected units sold per month, variable cost per unit, and the margin they want to keep. If they cannot answer, use their best guess and mark it as a guess.

2. **Compute the cost-plus floor.** Cost per unit = (monthly fixed costs + hours x hourly labor cost) / expected units + variable cost per unit. The floor price = cost per unit / (1 - target margin). Run the self-contained script below with their numbers, save and run locally first if you change it.

```python
def price_plan(monthly_costs, hours_per_month, hourly_labor_cost, units_per_month,
               variable_cost_per_unit, target_margin):
    total_cost = monthly_costs + hours_per_month * hourly_labor_cost
    cost_per_unit = total_cost / units_per_month + variable_cost_per_unit
    floor = cost_per_unit / (1 - target_margin)
    return {"cost_per_unit": round(cost_per_unit, 2), "floor": round(floor, 2)}

print(price_plan(monthly_costs=3000, hours_per_month=80, hourly_labor_cost=50,
                 units_per_month=40, variable_cost_per_unit=20, target_margin=0.30))
```

3. **Estimate the value-based ceiling.** Ask what problem the buyer avoids or what outcome they gain, in their own dollars. A client saving 10 hours a month will compare your fee to the cost of those hours, not your costs. The ceiling is what the result is worth to them, roughly. If they cannot name a buyer outcome, the price is a guess and they need buyer conversations first.

4. **Pick a starting price between floor and ceiling.** Closer to the ceiling if the buyer outcome is concrete and provable, closer to the floor if they are buying market share or still proving demand. State which and why in one sentence.

5. **Design tiers (good / better / best).** Three tiers only. The middle tier should be the one you want most buyers on, with the best balance of features for the price. The top tier anchors high and exists for buyers with bigger needs, not as a joke tier. The bottom tier is a real usable product, never a crippled demo meant to shame people upward. Space them roughly 2x apart in value terms (e.g. $29 / $59 / $119). Note the standard pricing psychology ideas briefly: the middle tier tends to attract the most buyers (often called the decoy or compromise effect), and charm prices like $49 instead of $50 are common practice; treat these as established patterns, not guaranteed lifts.

6. **Use anchoring honestly.** Anchoring means showing a higher reference price first so the real price looks reasonable. Do this with real numbers only: your own higher tier, a comparable competitor price the buyer can check, or the cost of the problem you solve. Never invent a fake "was $999" price.

7. **Test willingness to pay with small experiments.** Pick the cheapest test that gives real signal:
   - Pre-sell: ask for money before building, with a refund promise if it never ships.
   - Two-price test: quote two different prices to two similar buyer groups and track close rates, not opinions.
   - Raise on new leads only: keep existing buyers at the old price, quote the new price to new prospects for two weeks, and watch what happens.
   - Van Westendorp survey: ask four short questions (too cheap to be quality, cheap, expensive, too expensive to buy) to 20+ real buyers; the overlap of "expensive" and "cheap" curves marks your window.
   Run one test at a time. Record what you quoted, to whom, and the close rate.

## Output Contract

Deliver a short pricing recommendation with: (a) the cost-plus floor and the math behind it, (b) the value-based ceiling and the buyer outcome it rests on, (c) the recommended starting price and which tier it sits in, (d) the three-tier structure with prices, (e) one concrete willingness-to-pay test to run in the next two weeks, and (f) what numbers you would need to see to raise the price next time.

## Operating Rules

1. Never set a price below the cost-plus floor unless it is a deliberate, time-boxed experiment with a written end date.
2. Every price needs a buyer outcome behind it. If nobody can say what it is worth to the buyer, the price is a guess and the fix is buyer conversations, not math.
3. Three tiers max. More tiers slow the buyer down and lower conversion.
4. Anchor with real reference prices only. Fake original prices, invented discounts, and countdown timers that reset are excluded here; do not teach them.
5. Scarcity is allowed only when it is true (a real seat limit, a real deadline). Fake scarcity is excluded.
6. Test with money or commitments, not opinions. "Would you pay $X?" answers are weak signal; a pre-sell or a two-price close-rate test is real signal.
7. Raise prices when the test data says buyers keep saying yes too fast. A close rate well above what you need means the price is too low.
8. State uncertainty plainly. Mark every input that was a guess as a guess.