The generative AI pricing opportunity

Gen AI Pricing: What to do when you know the cost of everything and the value of nothing.

With the rise of gen AI technologies, there is an opportunity – and a critical need – for B2B SaaS companies to review how they price their products effectively. 

Three factors are driving this opportunity: 

1. GenAI enables products, features and outcomes (forms of value) that were not possible using previous technologies.
2. The cost of compute for gen AI can be significant, especially compared to the trivial costs of compute (marginal cost) typically associated with scaling usage of SaaS products.
3. There is not yet a generally used and accepted market standard in pricing models for gen AI (and, in many cases, nor is there ready acceptance of the value generated). 

This context presents a unique opportunity for B2B SaaS companies to develop a pricing strategy that increases market share whilst capturing more value. Crucially, this pricing strategy needs to be coherent with the unique value propositions of your gen AI offerings. There is no universal solution. Below is a framework to help you think through your own pricing strategy, and a few examples of how other businesses are pricing their gen AI offerings. 

GenAI pricing framework

Our framework helps you understand how to capture value from products that use gen AI. It's based on three questions: 

1. Where are you on the innovation curve?
2. What's your marginal cost?
3. Is the value of your product well-understood?

Download the framework

“Software companies have historically leaned towards subscription and per-user model (even though there are signs of a shift to usage-based and hybrid models). This is still the case in the first wave of breakout AI apps. We are seeing signs of very innovative pricing structures among the second wave of AI companies; these pricing models could unlock faster customer adoption while capturing more overall revenue.”

Mark Stiving & Steven Forth, How AI Functionality is Getting Priced, 2024

Examples in the market

What to do next 

If you’re reading this, then you’ve already started. A sensible next step, as a recent Pricing Leaders Community peer exchange concluded, is establishing a generative AI pricing function or committee.¹ 

This committee should be responsible not just for defining your approach to pricing, but for enabling the approach in your company (such as through sales training), and for reviewing its performance. 

Looking ahead, it’s important to note that the market will continue to move. The costs and capabilities of the technology change frequently and significantly. Your generative AI pricing strategy shouldn’t just be viewed as a single decision at a moment in time, but a continuous evolution that moves with the market.

“The less consideration companies devote to pricing strategy and pricing models, the greater the risk that they will artificially limit the potential of their solutions by discouraging customers from experimenting. This will not only limit the reach and network effects that would make those solutions more valuable but will also leave open the door for new entrants with better pricing options.” 

_{BCG, GenAI Needs Pricing Strategies to Match Its Potential, 2024}

_{1. L.E.K Consulting, B2B SaaS Pricing Leaders Community Peer Exchange, 2024}