Outcome-based pricing: when tying price to outcomes meets customer reality

Outcome-based pricing is trending in SaaS, not the least due to the need to move away from user or seat based pricing because of the impact of AI these days. I recently replied to a forum post from Rob Litterst on the PricingSaaS community titled “Trend-watch: Baby Steps toward Outcome-Based Pricing” and wanted to share my take on the challenges of this approach.

The charm of outcome-based pricing

At first glance, pricing tied to outcomes seems appealing. It promises a direct link between value delivered and the price charged. Some companies are taking baby steps, adding outcome-focused add-ons within traditional seat-based pricing models, to test the waters. However, my experience shows that the transition is rarely smooth.

For the record, I define the difference between outcome-based pricing and value-based pricing as follows. Outcome-based pricing is a specific form of value-based pricing that requires clear, quantifiable metrics and a validation mechanism. Value-based pricing is broader: prices are set based on perceived value of a product or service, taking into account factors like return on investment, cost savings, and overall benefits. The key is that price is aligned with the value the customer gains.

The customer’s contribution matters

In many pricing scenarios, customers are not passive recipients of outcomes. They themselves invest in key elements to get the outcome: people, content and data, infrastructure, processes, and training.

When you try to justify pricing purely on the outcome, customers very often push back. They feel that since they have invested in these elements, it is not right for you to claim full credit by anchoring the price solely on the end result.

On the other hand, these elements are tangible and measurable, making them more logical anchors for pricing models. By clearly defining your contribution with your solution to these elements, by explaining the benefits of your solution on the element, or by proving an ROI on an element, you have a great way to start value-based pricing. And yes, users or seats are a bad idea, with the sole exception being when your solution clearly takes the specific user to another level.

Lessons from multiple repricing initiatives

Over several repricing initiatives, I have observed that outcome-based pricing tends to meet resistance. Customers are more comfortable when pricing is tied to elements they value. Good elements are recognizable (they somewhere pay in a similar way, which is why user or seat based pricing is popular), causal (the customer must recognize the relation between your solution and the benefits they get), and clearly connected to a cost you carry as a solution provider, which makes it a given for them to pay for that element in some way.

Tying price to outcomes alone can create friction because it overlooks the significant role the customer plays in achieving those outcomes.

When outcome-based pricing can work

Outcome-based pricing is not off the table. It has its place, particularly in large-ticket B2B sales. Some of my clients successfully use this model, but only after investing heavily in sales enablement. They build robust frameworks that clearly articulate how the outcomes are achieved, defending their proposals effectively. It is hard work, but for the right deals, the extra effort can pay off.

The bottom line

Outcome-based pricing is an attractive concept, but the customer’s contributions often demand a more nuanced approach. For most, anchoring pricing to tangible metrics like people, data, dashboards, reports, or infrastructure results in a clearer, more acceptable model. While outcome-based pricing can work for certain large-scale deals, aligning your pricing strategy with what your customers control will generally lead to a smoother, more defensible process.

Keep your pricing anchored to clear, measurable elements and avoid overcomplicating the value conversation. This keeps the focus on what really matters for your customers.

Want to figure out the right pricing anchor for your product? Book a conversation.