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name: prd-v03-pricing-model description: Select and validate pricing model for PRD v0.3 Commercial Model. Triggers on requests to set pricing, choose monetization model, design pricing tiers, validate willingness to pay, or when user asks "how much should we charge?", "what pricing model?", "freemium vs paid?", "how to structure tiers?", "price point?". Consumes Competitive Landscape (CFD-) and Product Type (BR-) from v0.2. Outputs BR- entries for pricing rules, tier boundaries, and competitive positioning.

Pricing Model Selection

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

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

Value Timing → Model Selection

Ask: When does the customer get value?

Competitive Anchoring Decision Tree

Copy1. 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:

CopyCompetitor: $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

Gate rule: Tier 1-2 evidence required before locking pricing. Tier 4-5 only for hypothesis generation.

Free Tier Design Rules

Only include a free tier if it serves a strategic purpose:

Anti-patterns:

• Free tier that satisfies most users (no upgrade trigger)
• Free tier that requires support (costs without revenue)
• "Free forever" for unlimited users (cannibalizes paid)

Rule: Every free tier needs a clear upgrade trigger tied to value moment.

Tier Design Framework

Structure tiers around value events, not feature count:

Tier boundary rules:

• Entry price = CAC payback in ≤3 months
• Pro upgrade trigger = clear usage milestone (not feature gate)
• Enterprise = only if you can support it (don't fake it)

BR- Output Format

Create pricing BR- entries using this structure:

CopyBR-PRC-XXX: [Rule Name]
Rule: [Imperative statement — what MUST happen]
Rationale: [Business driver — why this rule exists]
Enforcement: [Where enforced — code, contract, process]
Evidence: [WTP validation, competitor anchor, cost structure]
Exception: [Override conditions and approver]

BR- Categories

Example BR- Entries

CopyBR-PRC-001: Entry Price Floor
Rule: Entry tier never below $15/mo (annual) or $19/mo (monthly)
Rationale: Below $15/mo, CAC payback exceeds 6 months
Enforcement: Stripe product configuration, pricing page
Evidence: CAC estimate $45, need 3-month payback
Exception: Founding customer 50% discount (Matt approval)

BR-PKG-002: Free Tier Upgrade Trigger
Rule: Free tier limited to 50 [units]; show upgrade at 40 (80%)
Rationale: Create natural upgrade moment without frustration
Enforcement: Usage tracking + UI prompt at threshold
Evidence: CFD-XXX shows competitors gate at 25-100 units
Exception: None — critical for conversion funnel

BR-CMP-003: Competitive Price Anchor
Rule: Maintain ≥50% savings vs [Competitor] at 5-user level
Rationale: Price advantage is core differentiator for SMB segment
Enforcement: Quarterly competitive price review
Evidence: CFD-XXX (competitor pricing); BR-001 (product type: Undercut)
Exception: If competitor drops price, floor takes precedence

Anti-Patterns to Avoid

Validation Workflow

Before locking pricing:

1. Calculate cost floor: What's minimum price for positive unit economics?
2. Identify anchor: What do customers pay today? (competitor or workaround)
3. Design tiers: Entry + Pro minimum; free only if strategic
4. Test WTP: Landing page with price, measure signup conversion
5. Lock BR- entries: Document as enforceable rules

Output Requirements

Before advancing to Moat Articulation:

• Pricing model selected with rationale (ties to product type)
• Price anchor identified (CFD- reference)
• Entry price point defined with unit economics check
• Tier boundaries defined (or "no tiers" justified)
• Free tier decision documented (yes + trigger, or no + why)
• WTP validation plan created (even if not yet executed)
• ≥3 BR-PRC/PKG/CMP entries created

Downstream Connections

Detailed References

• Good/bad examples: See references/examples.md
• BR- template worksheet: See assets/br-pricing.md