Move off cost-plus
Cost-plus pricing locks you to your own efficiency curve. Value-based pricing captures what the buyer is willing to pay.
Build a price ladder
Three tiers, anchored to value:
| Tier | Buyer | Price ratio | Purpose |
|---|---|---|---|
| Entry | Price-sensitive | 1.0× | Land new customers |
| Standard | Most buyers | 2.0–2.5× | Profit engine |
| Premium | Quality-led | 4.0–6.0× | Anchor + halo |
Most buyers pick the middle tier. The premium tier exists to make the standard tier look reasonable.
Charge for outcomes, not inputs
Where possible, structure pricing around the outcome:
- "Save 10 hours/month" not "5 hours of work"
- "Guaranteed delivery in 7 days" not "£X per project"
- "Lift conversion by 20%" not "Run an A/B test"
Outcome pricing supports higher price points and reduces scope creep.
Annual reviews built into contracts
Every contract should allow an annual CPI-linked increase. Apply it every year, without exception. Skipping one year sets a precedent you'll regret.
Discounting discipline
- Never discount without an equivalent concession (longer term, larger commitment, case study)
- Use annual prepayment discounts (5–10%) — they improve your cashflow more than they cost margin
- Avoid percentage discounts in marketing — they train customers to wait
Test before rolling out
A/B test new pricing on 10–20% of new business for 4–8 weeks before applying universally. Measure conversion and lifetime value, not just close rate.
Premium clients get an annual pricing review as part of the Ernest & Co service.