Impact Pricing Blog

Daniel Cho challenged an example I’d been using in a LinkedIn conversation. The more I tried to defend my original thinking, the less convinced I became. So I opened the question up to the pricing community. The disagreement in the comments helped me see what I was missing. Sometimes defending an idea is exactly how you discover you need a better one.

Here’s what I came away with.

I Was Wrong About Outcome-Based Pricing

Let’s say that Xerox charges per page printed. Sell that to an ordinary office and you have an output metric. Sell the exact same thing to a commercial print shop and you have an outcome metric. Nothing about the metric changed. The buyer did.

I’ve been thinking of Outcome as the fifth type of pricing metric, sitting alongside Input, Access, Activity, and Output. It isn’t one. 

There are only four categories. Outcome is a subset of output. What elevates an output metric to an outcome is a direct link to the buyer’s profit.

For the ordinary office, pages sit far from profit. Revenue doesn’t move meaningfully with the number of pages printed today if at all. But for the print shop, each page connects directly to revenue, which flows to profit. Turning pages into money is the entire business.

Two tests determine whether an output qualifies as an outcome: Can you attribute the result to what you sold? Does the result land on profit? Most output metrics clear the first. Fewer clear the second. 

Fin charges per resolved support case, which reduces the cost of running support. Chargeflow charges a percentage of recovered chargebacks. Both are clean on attribution and both flow straight to the bottom line.

Where I’ve Landed

Outcome is a subset of output. What separates them is a direct link to the buyer’s profit. When that link is clear and attributable, you have outcome-based pricing. When the link is real but indirect, you have output-based pricing, and that is a perfectly honest answer. Output is what most companies land on because finding a metric with a clean, direct profit connection is often not possible.

The goal is always to get as close to profit as attribution allows. Outcome-based pricing is the holy grail because it gets there. But unlike the other four categories, you cannot decide whether a metric qualifies without understanding this specific buyer’s economics. Change the buyer, and the answer can change completely, even though nothing about what you are selling did.

Share your comments on the LinkedIn post.

Now, go make an impact!

A note on process: Claude (and Rebecca) helped me write this. Every idea, argument, and opinion is mine. AI made the words better.