Pricing Strategy: When Your Revenue Model and Contract Terms Don’t Align

The Problem

A mid-stage SaaS company with an AI-powered product came to us with a pricing challenge that’s becoming increasingly common: their business model had evolved, but their pricing and contracts had not kept up.

They offered free pilots to land customers. They didn’t charge for implementation despite significant professional services work. Their pricing was complex and they spent a lot of time in the sales cycle explaining it. Worse, their contracts had no price protection, leaving both them and their customers exposed to unpredictable future costs.

On paper, they were closing deals – but smaller deals than they had hoped and at less of a margin than their investors expected. In reality, they were training customers to expect free work, underpricing their value, and building a business model that didn’t scale profitably.

The real problem wasn’t their product. It was the disconnect between how they priced, how they contracted, and how they actually created value.

What Pricing Strategy in Contract Context Actually Means

Pricing strategy isn’t just picking numbers or basing your pricing on the competition. It’s architecting the commercial relationship between what you deliver, your cost structure and what you your clients are willing to pay you – then translating that into a scalable pricing model and enforceable contract terms.

Most companies think about pricing and contracts as separate functions. Pricing lives in a spreadsheet. Contracts live in legal review. The two rarely talk to each other.

But your pricing model IS your contract. Every discount structure, every consumption metric, every implementation fee – these aren’t just commercial terms. They’re legal obligations that define the bargain between you and your customer.

In contract law, a “bargain” requires consideration – something of value exchanged by both parties. When your pricing doesn’t reflect the value you deliver, or when your contract terms don’t protect that pricing, you’re not just leaving money on the table. You’re creating agreements that do not scale for your company.

The Approach: Aligning Pricing, Value, and Contract Structure

We worked with this company to rebuild their entire commercial framework—pricing model, contract terms, and implementation structure—as an integrated system.

Step 1: Eliminated Free Pilots in Favor of Paid Ramp-Ups

Free pilots train customers to devalue your product. Instead, we designed a paid ramp-up model that:

Started with a structured proof-of-concept (paid, scoped, time-bound)
Transitioned into production pricing with volume discounts for early adoption
Created contractual commitment from day one

This wasn’t just better economics. It was better contract positioning. Paid engagements establish the legal “bargain”—both parties have skin in the game from the start.

Step 2: Charged for Implementation (Real Work Deserves Real Revenue)

The company was doing significant implementation work—data integration, workflow design, training—but giving it away to close deals. We built implementation fees into the pricing structure with two outcomes:

Revenue that covered actual delivery costs
Contract terms that defined scope, deliverables, and success criteria

When implementation has a price tag, it has a contract structure. That means clear expectations, defined obligations, and protection when scope creeps.

Step 3: Built AI Consumption Model into Pricing and Contract Terms

Their AI product had variable usage patterns, but their pricing was flat. We designed a hybrid model:

• Base subscription for platform access
• Consumption-based pricing for AI usage
• Volume tiers that rewarded higher adoption

Then we made sure the contract reflected this model with precision:

• Clear definitions of what constituted a “unit” of AI consumption
• Measurement methodology and reporting requirements
• Overage structures and true-up processes
• Contract language that tied pricing to actual usage without ambiguity

Step 4: Structured Discounts That Incentivized the Right Behaviors

Rather than ad-hoc discounts negotiated deal-by-deal, we built discount structures into the contracts:

• Volume commitments that rewarded scale
• Multi-year agreements with predictable annual increases (CPI-based)
• Adoption milestones that unlocked better pricing as customers grew

These weren’t just sales tactics. They were contractual terms that aligned customer behavior with company revenue goals.

Step 5: Price Protection That Benefited Both Sides

One of the biggest gaps: their contracts had no price increase provisions. Customers were locked into year-one pricing indefinitely, exposing the company to rising costs and exposing customers to unpredictable future pricing should the contract terminate. We added reasonable CPI-based annual increases tied to contract renewal terms. This gave:

• The company predictable revenue growth
• Customers protection from arbitrary price hikes
• Both parties clarity on long-term economics
• Less contract management – reduction in amendments needed

What Changed

They started closing deals with better economics. Paid proof-of-concepts filtered out tire-kickers and created immediate revenue. Implementation fees turned services work from cost center to profit center.

Their contracts became sales tools. Instead of fighting over terms, their pricing structure became a differentiator. Structured discounts and clear consumption models made buying easier, not harder.

Revenue became predictable. AI consumption pricing tied to actual usage meant revenue scaled with customer value. CPI increases protected margin without surprise price shocks.

Their quotes told a value story. Instead of a single line-item price, their quotes showed:

• ROI based on customer-specific value drivers
• Clear cost breakdown (platform + consumption + implementation)
• Discount incentives tied to commitment levels
• Multi-year total cost of ownership

Customers could see exactly what they were paying for and why it made financial sense.

The ROI of Getting Pricing and Contracts Right

Let’s quantify the impact:

Before:

• Free pilots converting at ~30% (low qualification)
• Implementation eating 15-20% of deal value in unpaid services
• Flat pricing leaving consumption revenue on the table
• No price protection eroding margin over time

After:

• Paid proof-of-concepts converting at 65% (better qualification + immediate revenue)
• Implementation revenue adding 20-25% to average deal size
• Consumption pricing capturing 30-40% more revenue from high-usage customers
• CPI increases protecting 3-5% annual margin improvement

For a company doing $5M ARR:

Implementation revenue: +$1M annually
Consumption upside: +$1.5M from existing customers
Reduced free pilot costs: +$300K (time and resources recovered)
Margin protection: +$150-250K annually from price increases

Total impact: $3M+ in annual revenue improvement – without acquiring a single new customer.

When You Need Pricing Strategy Work

You know your pricing and contracts need strategic alignment when:

• You’re giving away valuable work to close deals
• Your pricing doesn’t reflect how customers actually use your product
• Contract negotiations always stall on commercial terms
• You have no price protection in your agreements
• Your sales team is negotiating pricing from scratch on every deal
• Revenue isn’t scaling with customer growth or usage

Pricing strategy isn’t about charging more. It’s about capturing the value you create, structuring contracts that protect that value, and building commercial relationships that work for both sides.

The question isn’t whether you can afford to invest in pricing strategy. It’s whether you can afford to keep leaving revenue in deals you’ve already won.

Ready to align your pricing with your contracts? Let’s talk about your pricing model.