What pinball machines teach us about value-based pricing

Let me start with a question I always ask in my workshops: how much do you think a modern pinball machine costs?

Go ahead, take a guess.

Most people say somewhere between €1,500 and €4,000. Makes sense, right? It is basically a big arcade game.

Here is the thing. That limited edition Elton John pinball machine? €12,000. The premium version next to it? Just under €15,000.

Still think it is just a big arcade game?

Two markets, two completely different value propositions

When I work with SaaS companies on their pricing, I often use pinball machines as an example because they perfectly illustrate a fundamental pricing principle: the same product can serve completely different markets with completely different willingness to pay.

There are essentially two markets for pinball.

The B2B market covers arcade operators, pubs, and entertainment venues. They see a revenue-generating asset. They calculate ROI based on coins inserted. They need reliability and serviceability. Price sensitivity is high.

The B2C market covers collectors, enthusiasts, and wealthy individuals. They see a status symbol. They value exclusivity and craftsmanship. They want the limited edition with golden legs. Price sensitivity is low.

The fencing exercise that changes everything

Here is where it gets interesting. When you do a proper fencing exercise, drawing the lines between segments where customers cannot jump between categories, you discover something crucial.

Those B2B buyers? They need a workhorse. Something that can take a beating from drunk pub visitors, operates reliably, and generates consistent revenue. They do not care about golden legs or special decals.

The collectors? They are buying a piece of art. A conversation starter. Future appreciation potential. They absolutely care about those golden legs.

And here is the kicker. The production cost difference between these versions is minimal. Maybe 5-10% more for premium materials. Golden legs? €50 extra cost. Special decals? €30. Certificate of authenticity? €5.

Total extra production cost: around €100. Price premium charged: €3,000+.

That is not cost-plus pricing. That is value capture.

The customs software parallel

This reminds me of a customs software company I worked with. We identified three potential segments: shippers, brokers, and transport providers. After doing the fencing exercise and analyzing willingness to pay, we made a tough decision. We completely ditched brokers and transport providers as target segments.

Why? They could use our solution to improve their operations, sure. But they did not value innovation enough to pay for it. The shippers, on the other hand, saw immediate value in compliance and speed.

Sometimes the best pricing decision is deciding who not to sell to.

Building your pricing architecture from the ground up

When I do this exercise on a whiteboard with clients, I build it from top to bottom. First, segmentation: who are your distinct buyer groups? Second, business outcomes: what are they really trying to achieve? Third, bundle and ladder: how do you package features for each segment? Fourth, how do they want to pay (purchase, subscription, usage)? And fifth, what is the actual price point?

Each step builds on the previous one. Skip a step, and your pricing falls apart.

The SaaS application

For SaaS companies, this translates directly. Your “Enterprise” tier is not just more features. It is a different product for a different buyer. White-glove onboarding costs you time but commands 3-10x pricing. Priority support is an organizational choice that creates massive margin expansion.

The goal is not to recover costs. It is to capture the value that each segment perceives.

The bottom line

Next time you are thinking about your pricing, do not start with your costs. Do not even start with your features.

Start with your segments. Understand what they value. Draw the lines between them.

Then charge accordingly.

Because somewhere out there, someone is happily paying €15,000 for a pinball machine while someone else is calculating if they can make their money back at €0.50 per play. Both are right. Both are profitable. But only if you fence them properly.

Want help drawing the lines between your customer segments? Book a conversation.