Good pricing comes down to six decisions. This post walks through each one and shows how we review a company’s pricing against them, using a single example to make it concrete.
When we review a company’s pricing, we look at six decisions in turn: who they sell to, what they sell, what it is worth to the buyer, how they charge, what they keep, and where they stand in the market. Each decision tells us something, and together they show how deliberately the price has been set.
The six make a useful checklist for any team looking at its own pricing with fresh eyes. To show how the review works, we will apply it to one company as we go.
This article is part of our Pricing and Packaging series. The anchor piece introduces the full framework of six decisions. Here, we put the framework to work, walking through each decision to review a company’s pricing.
Meridian Software is a mid-market workflow platform with eighty million dollars in annual recurring revenue. The business is doing well. Bookings are on plan, the pipeline is healthy, and the team is closing at the rate the model expects.
Meridian’s leaders are simply curious whether their pricing still holds up. The product has grown, the market has shifted, and the price list has not changed much in a couple of years, so they want a clear read on where their pricing stands today. That is a healthy question to ask, and the six decisions are a good way to answer it.
We will look at Meridian through each of the six in turn. The point is not to find something wrong, but to see what the framework reveals when you apply it to a real company’s pricing.
Each decision is sound in places, with a clear spot to sharpen. The review reads them one at a time.
The first thing we look at is how a company defines its segments. Meridian groups its customers by size and industry, which is common and makes the sales territory easy to organize.
What we look for is whether the segments reflect what different buyers are willing to pay, and here there is room to sharpen. Two of Meridian’s segments derive very different values from the same module, yet both are quoted the same way, which suggests the segment that values it more could support a higher price. Defining segments by willingness to pay, rather than by size, is usually the first place a pricing review adds value. We go deeper into this in Customer: Segmenting by Willingness to Pay
Next, we look at how the offer is packaged into tiers, and how features are distributed across them. Meridian has an Entry, Core, and Premium structure, which is a sound starting point.
The question is whether each tier gives the buyer a clear reason to move up, and the tier mix is the tell. At Meridian, most buyers land in Entry, which indicates that the premium tiers have accumulated features due to a product-development focus, rather than a response to what buyers are truly willing to invest in. When packaging evolves in this manner, the solution becomes more complex without providing a compelling justification for buyers to upgrade, causing the land-and-expand model to break down. We cover tier design in Offer: Packaging and Tier Design
We then look at how the price relates to the value the customer perceives, rather than to internal cost. Meridian sets its prices by starting from a cost figure and adding a markup, which feels objective because the number traces to something concrete.
The opportunity is that cost has little to do with what a customer is willing to pay. Value-based pricing starts from the worth the buyer perceives, and published pricing research consistently associates it with stronger margins than a cost-plus baseline. For Meridian, moving toward value-based logic is the change most likely to lift realized price. We show how to quantify worth in Value: Quantifying What Your Product Is Worth
Here we look at the pricing model and how current it is. Meridian’s price list was carefully reasoned out two years ago and has changed little since, even as the product added capabilities and the market moved.
A price set at one moment gradually drifts out of step with the value it represents. Because the drift is slow, no single quarter makes the case for revisiting it, which is why a periodic review is worth building into the calendar rather than leaving it to whoever notices first. Meridian’s model is reasonable; it simply reflects the business it was a couple of years ago rather than the one it is today.
That drift is worth more than it appears, because price is the lever with the least dilution attached.
Why a Point of Price Is Worth More Than a Point of Volume
The same one percent improvement lands very differently depending on which lever it moves.
Illustrative operating model: revenue 100, variable cost 40, fixed cost 50, operating profit 10. Volume held constant on the price move.
A point of price carries no additional cost of goods, so it reaches operating profit almost intact. A point of volume brings the cost of serving that volume with it and arrives at roughly half the cost. Cost programs land lower still. For Meridian, that arithmetic is the argument for treating a stale price list as an active revenue question rather than an administrative one. We look at how to choose a model in Price: Choosing How You Charge
This is where we look at margin discipline: the floors, the discount authority, and whether compensation supports the price. Meridian has no written floor beneath which a deal will not go, and pays its sellers on booking volume.
Without a floor and a clear approval matrix, discounting tends to become the first tool a rep reaches for. A margin floor also holds, as does the compensation behind it, which is why we look at pricing and sales compensation together rather than separately. At Meridian, aligning the plan with the price would let the two reinforce each other rather than pull in different directions. We go deeper into Economics: Margin Floors and Discount Discipline
Economics is the decision most reviewers underweight. Value is the buyer’s side of the equation, and Economics is the seller’s: the floor you hold and the compensation that makes the floor real. A floor without an aligned comp plan is a policy. A floor with one is a constraint.
Finally, we look at competitive posture: the reference prices buyers use for comparison and how each tier is positioned. Meridian prices in the middle of its market without a deliberate posture by tier.
A clear posture lets each tier do a different job: Entry to win volume, Core to capture the mainstream, and Premium to anchor the set. Meridian’s Premium tier, priced closer to Core than the market would bear, gives up some of that anchoring effect. Setting posture deliberately by tier is a straightforward adjustment that helps the whole lineup read more clearly to buyers. We cover posture in Market: Setting Your Competitive Posture
Applied together, the six decisions give Meridian a clear read on where its pricing stands. Nothing here is a crisis. The business is healthy, and each choice was reasonable when it was made.
What the review reveals is a set of specific, addressable opportunities: sharper segments, tiers that earn the upsell, value-based logic in place of cost-plus, a refreshed model, a real margin floor, and a deliberate market posture.
It also reveals something the individual findings do not show on their own. Buyers landing in Entry and Premium priced too close to Core are the same problem seen from two angles, and its missing floor and its volume-based comp plan are one problem rather than two. Six decisions produced four real issues, which is the point of running them as a set. Reviewed one at a time; each looks like a modest adjustment in its own lane. When reviewed together, the overlaps show which fixes address two problems at once.
To place a company on a scale, we use a five-level pricing maturity ladder, and to turn observations into a plan, a short executive diagnostic and a first ninety-days plan. Both are covered later in this series.
Each of the six decisions has its own depth, and we take them one at a time across this series, using our Pricing and Packaging Framework as the guide.
Meridian will return throughout, one decision at a time, as we go deeper into how each is assessed and improved. The work sits inside our broader commercial transformation practice, where pricing connects to compensation, revenue operations, and go-to-market as a single system.
Reviewing pricing does not always require a problem to solve. It requires a clear set of questions. The six decisions give any team a reliable way to review its own pricing and identify where it is already strong and where a deliberate choice would help.
Meridian is a healthy company that wanted to know whether its pricing still held up, and the six decisions gave them an answer specific enough to act on. Any team can run the same review, and the rest of this series takes each decision one at a time, so you can go as deep as you need.
Download the Pricing and Packaging Framework
The complete framework, with the maturity ladder, the diagnostic, and a sequenced ninety-day plan.
The Pricing and Packaging Assessment
Your pricing reviewed against the six decisions, scored against the maturity ladder, with a clear read on where to focus.
Start With the Overview
See how the six decisions connect, and what each one reveals about a company’s pricing.
Next, we look at why this matters now: how AI is changing pricing power for both buyers and sellers, and what that means for a company like Meridian.
Sources
Directional figures on the margin advantage of value-based pricing over cost-plus pricing draw on published pricing research, including analyses by McKinsey and Simon-Kucher on pricing and profitability. Ranges are stated directionally rather than as precise claims.