🔦 Spotlight - Pricing strategy

How to launch an effective pricing strategy that sticks, in 10 steps

Getting your pricing strategy right is both an art and a science. Most importantly it takes judgement about what to consider, and how & who to run it. Let’s look at a few examples of pricing strategy in the public eye:

Case study 1: Open AI (surprise surprise)

OpenAI is losing money on its Pro subscription. At $200/m it might sound hard to do, but that's what's happening.

Sam Altman disclosed that he “personally chose the price” because he thought “we would make some money.” ChatGPT Pro offers unlimited access to the company’s latest models, including a “full” version of the latest OpenAI o1 model that can be used to “think harder and provide even better answers to the hardest questions.”

Without being in the room, you can imagine what happened - they developed a strong model, said “Hey this will make us some money”, and we are launching it tomorrow, so let’s stick a price on it. What’s a good multiple on the current subscription? 10x. Voilà.

There are three key issues with this example:

- no customer value into consideration (the people who need o1 might be prepared to pay 100x for it)
- assumption that past usage will predict future usage (the segment that needs o1 really needs it and will use it a magnitude above regular models)
- no alignment of marketing, sales, and finance (some of the materials about the plans were old when it launched)

Such mistakes are common—this is when the HiPPo (highest paid person’s opinion) in the room gets to bulldoze over everyone, common sense, and analytics, just to put something out there. What they don’t realise is they put out there an anchor that is difficult to get away from.

Case study 2: BMW

In 2020, BMW rolled out a heated seats subscription, aiming to offer customers flexibility. The pitch? Pay only when you need the warmth, avoid upfront costs, and stop paying when you don’t. On paper, it sounded like a savvy, customer-friendly move.

Without being in the room, you can imagine how it went down:
Someone likely pitched this as “the future of monetizing cars,” citing Tesla’s success with tech-driven subscriptions like autonomous driving. The team agreed—if Tesla can do it, so can we. Heated seats? Check. Subscription? Check. Launch it and watch the money roll in.

What they didn’t anticipate was the backlash. Customers were furious at being charged for something already installed in their cars. Unlike software features, heated seats are tangible, physical hardware. Consumers associate the value of heated seats with the hardware itself—not as a service to “rent.”

Here’s what went wrong:

- no customer perception analysis (BMW misread the emotional attachment consumers have to the hardware they’ve paid for)
- failed distinction between software and hardware value (while customers see software as an upgradeable feature, hardware like heated seats feels like something they “own” outright)
- poor market positioning (in the luxury market, where heated seats are often standard, the subscription felt like a downgrade)

BMW eventually reversed course, limiting subscriptions to software or services. The lesson is that you need to understand the driver of value for your customer and how they perceive features, how they couple them, or not, with acceptable business models, and what is the ‘hygiene factor’ for a segment.

So how to avoid this? Let’s dive in…

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