Never Show Customers Your Underpants (A Guide to AI Pricing)

Are you making the #1 mistake in AI pricing? Many founders are using their old SaaS pricing model, but for AI, that’s a huge error. As pricing expert Dan Balcauski explains, it’s like showing customers your “underpants”, and it’s killing your sales. In this guide to AI pricing, Dan breaks down why the game has changed. Unlike traditional SaaS, AI products have significant variable costs and unpredictable customer value, creating a new set of challenges for founders. We explore the psychology of value-based pricing, how to choose the right pricing metric, and the strategies companies like Google and OpenAI are using to price their AI tools. Check out the company: https://www.producttranquility.com

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🕒 CHAPTERS

00:00 - Why Your SaaS Pricing Model is Obsolete

02:05 - The Value vs. Cost Dilemma of AI

03:20 - Foundation Models vs. AI Applications

07:15 - Why AI Product Prices Are So Inconsistent

11:15 - The Power of Long-Tail Distributions in Pricing

17:05 - The Problem with Capped "Unlimited" Plans

19:10 - Why AI Companies Are Hardware Constrained

24:30 - The 2 Axes of a Smart AI Pricing Strategy

28:00 - The #1 AI Pricing Mistake: Showing Your "Underpants"

31:30 - The Psychology of Value-Based Pricing

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