Price and package a product

Recommendation: charge for document processing, not collaborators

Tom is right about the margin problem, but a blanket increase treats the symptom. Replace unlimited processing with a platform fee plus metered pages; make seats unlimited. Launch for new customers in January, migrate existing self-serve accounts after notice, and renegotiate enterprise contracts at renewal—not unilaterally.

The complete export shows $43,057 revenue, $32,903 processing cost and 23.6% gross margin. Enterprise accounts generate 71% of pages but 44% of revenue, losing $4,232 monthly. Startups generate $8,688 gross profit and are subsidizing heavy users.

Even with no churn and immediate contractual permission, Tom’s 30% increase produces only 41.2% overall margin and 5.9% enterprise margin. Northwind and Halden remain loss-making.

Proposed model and customer impact

A billable page is a successfully processed page; failures and internal retries are not charged. Provide usage dashboards, budget alerts and optional customer-controlled hard limits. Never silently interrupt production traffic.

The following is a fully migrated, unchanged-usage scenario, using reported account costs. It excludes churn, growth, transition concessions and future cost reductions.

Enterprise projections assume commitments do not exceed observed annualized consumption. Final commitments require longer usage histories and seasonality analysis.

This model deliberately sacrifices $4,377/month of startup revenue to lower adoption and collaboration friction. That is an investment to validate, not “free” growth. Conversely, mid-market V would move from $297 to $1,383; we should expect objections and possible churn.

The enterprise rate yields 60% incremental processing margin at today’s cost, before the platform fee. It remains well below the published competitor page rates, although September list prices do not establish negotiated prices or willingness to pay. If unit costs fall another 10%, unchanged-volume portfolio margin reaches approximately 68.7%; we should not spend those savings before they materialize.

These margins use the supplied cost definition. Finance must verify whether support and other delivery costs belong in COGS before adopting formal margin targets.

Migration and enterprise renewals

January: offer the model to new customers as a controlled rollout. Before billing, reconcile meters against infrastructure usage and invoices. Give existing self-serve accounts 90 days’ notice, two shadow invoices, and an account-specific comparison. Contact every materially affected mid-market account; offer usage optimization and narrowly approved, expiring credits rather than indefinite unlimited-use grandfathering.

Removing seat charges also requires workspace-level billing and anti-splitting controls for included allowances. Publish clear page-counting rules and a dispute process.

Enterprise: honor existing agreements through renewal unless customers voluntarily amend them. Confirm notice requirements immediately; if a deadline has passed, follow the contract. Use actual billed revenue as the baseline: the file’s description of discounted enterprise seats does not reconcile with observed revenue per seat.

For the 2027 renewal cycle:

For difficult renewals, authorize a 90-day bridge at $500 plus $0.002/page, then the target rate. This preserves more than 40% processing margin at current usage while providing an explicit transition—not another unlimited contract. Finance approves exceptions and their gross-profit cost.

If existing self-serve accounts migrated while all enterprise contracts remained unchanged, portfolio margin would be only 37.3%. The 65.2% figure is a destination, not a January forecast. Build the operating plan from renewal dates, signed commitments, concessions and account-level retention scenarios. Be willing to lose persistently uneconomic volume, but do not confuse that with costless churn.

What the price test actually says

It does not justify a universal increase.

• The intended 50/50 allocation failed: 1,240 versus 870 visitors gives a sample-ratio-mismatch statistic of approximately 64.9, with p < 10⁻¹⁴. Investigate assignment, exposure logging, exclusions, bots, acquisition channels and repeat visitors before causal interpretation.
• “Not significant” does not mean equivalent. Even ignoring allocation concerns, conversion changed by approximately −0.17 percentage points, with an approximate 95% interval of −2.0 to +1.7 points—wide enough to include substantial harm.
• The population and outcome are wrong for Tom’s conclusion: new self-serve sign-ups over two weeks tell us nothing directly about installed-base churn, enterprise renewals, seat reductions, usage cost or durable gross profit.
• $129 is a 30.3% increase over $99, but the test measures neither realized revenue per visitor nor longer-term contribution.

Repair the experiment, then test the new model against current pricing with persistent account-level assignment. Predefine sample size, conversion guardrails and 90-day gross profit per eligible visitor; also track activation, retained usage, bill disputes and retention by segment. Use negotiated enterprise pilots—not this acquisition test—to validate renewal economics.

To: CEO From: Head of Product Re: Alternative to the across-the-board 30% increase

Summary

Margin fell from 41% to 24% because pages are free inside the seat price and our cost is per page. Six enterprise accounts use 71% of all pages and pay 44% of revenue. Their combined gross margin is −22% (−$4.2k on $19.0k last month), and four of the six lose money. Startups run at 87% margin and mid-market at 41%.

A flat 30% doesn't fix this, for three reasons: - Contracts can't be repriced in January. All six renew in 2027, and I haven't seen any reopener clauses. - Enterprise stays near zero margin. Even at +30%, enterprise would reach only about 6% margin, and it would erode again as pages grow. Northwind's pages tripled in a year. - The price test doesn't support it (below).

I recommend pricing on pages, which is what drives our cost.

Proposed model and effect by segment

Figures are monthly, at last-30-day volumes and today's $0.0012 cost per page, with no churn.

Why these rates

• Overage at $0.005: about 76% margin on the extra pages. It is below the cheapest competitor's per-page rate ($0.008).
• Enterprise at $0.002: 40% margin today. If cost keeps falling 10% a quarter, it reaches about $0.0008 after four quarters, which puts this rate near 60% margin. That gives room to concede on rate later without losing money.
• Competitor comparison: at Northwind's 4.8M pages, DocuLens list price is about $43k a month. We would charge $9.6k. Arcadia is evaluating a competitor, but at its 3.3M pages DocuLens lists near $31k against our $6.6k.
• Enterprise seats: I'm dropping seat charges. Seats don't drive cost and mostly add negotiating friction.

Gross margin comparison

The CFO plan assumes zero churn. Even on that assumption, its best case only gets back to last year's 41%.

Getting there

Self-serve (mid-market and startup): - Meter and display pooled page usage in the dashboard now. - Send mid-market a 60-day notice with a personal usage preview. Launch the new plan around April 1. - Charge overage at half rate for the first quarter, which softens the three biggest increases. - Startups see only a new allowance line, with no change in price.

Enterprise: Start before the renewal dates, and have legal check the contracts first. - Northwind (Feb 2027): Decline "the same rate". At 3x page growth again, its cost would be about $17k a month against $3.2k of revenue. Offer a two-year deal instead, with a price lock, a committed volume and a modest discount above 6M pages. That gives them the certainty they want. - Halden (Jun 2027): Same structure as Northwind, with an early-renewal offer. - Arcadia (Mar 2027): It has the smallest increase of the six accounts (+47%) and a competitor in play. Lead with value, and keep the rate flat to the competitor's list. - Copperfield (Jan 2027): First to renew, so the first live test of the model. Start talks in Q2 2026. - Meridian and Brightwater: Standard offer at renewal.

Northwind and Halden together lose about $4.7k a month, so losing them would improve gross margin dollars. We can hold the line. For the two losers the loss continues until renewal unless they take an early-renewal offer, so I'd offer a glide path (a year-one rate between $0.0015 and $0.002) in exchange for committing early. That keeps even the worst case above cost.

The price test

I wouldn't use it as cover, because it doesn't show what the readout says.

1. The split is broken. A 50/50 split of 2,110 visitors should give about 1,055 per arm. We got 1,240 and 870, which is a 59/41 split. That is far too lopsided to be chance (p well below 0.001). Something in assignment or tracking failed, so the arms aren't comparable.
2. "Not significant" is not "no effect". The difference is −0.17 points, with a 95% interval of about −2.0 to +1.7 points. $129 pays off only if conversion stays above about 3.8% (a drop of less than 23%), and the data can't rule out falling below that.
3. It's the wrong test. It ran two weeks in December. It covers new sign-ups only and measures starting to pay, not retention or usage. It says nothing about existing customers, enterprise, or per-page pricing. Under my plan startups don't change price at all.

To test $129 properly, we'd need working randomisation and revenue per visitor plus 90-day retention as the measures. Detecting a one-point conversion change needs about 7,500 visitors per arm. I'd run that only if we want a startup price rise later.

Risks and assumptions

• Figures assume static volumes, no churn, and today's unit cost. Enterprise page growth raises both revenue and cost under the new model, and the per-page rate protects margin.
• Mid-market bill shock is the main self-serve risk. The three accounts with 2–4x increases are the ones most worth a personal call. They are also the three loss-makers (P, Q and V).
• A 2–3x enterprise increase may cost us one or two accounts. I think that is acceptable, but it is a judgment call.
• Full enterprise run-rate arrives only after the last renewal in November 2027. Savings this year come mostly from self-serve and any early renewals.
• Not yet checked: contract terms (fair-use or reopener clauses) and whether billing can meter pooled pages by April.

Decision requested: approve the model for planning, and let me begin the Copperfield and Northwind conversations this quarter.

Parsewell pricing: an alternative to a flat 30% increase

To: CEO | From: Head of Product

Recommendation

Tom has correctly identified the margin problem but proposes the wrong fix. We don't charge for pages, and pages are the only thing that costs us money. I recommend we keep seats for self-serve, add a page allowance with overage, and price enterprise per page. At today's volumes this takes gross margin from 24% to 42%. Startups pay nothing extra, and margin keeps rising as cost per page falls. A 30% increase reaches 41% on paper, but only if nobody churns and we could reprice contracts in January. We can't. And it leaves the cause in place.

Where the margin went

All figures come from the 30-day export (80 accounts, 27.4M pages, $43,057 revenue, $32,903 cost to serve).

• Enterprise is underwater. It earns $0.00098 per page against a cost of $0.0012, a gross margin of −22%. Northwind and Halden alone lose $4,736 a month.
• Mid-market makes 41%. Three accounts (P, Q, V) lose money because a few seats push heavy volume.
• Startups make 87%. They are not the problem.

Seats don't track cost. Northwind's pages tripled in a year on the same contract. Cost per page falls about 34% a year (10% a quarter), but volume growth of that size outruns it. That is how margin fell from 41% to 24%.

The model

Why this shape:

• Startups: no startup exceeds 50k pages per seat, so the change is invisible to them. That protects the funnel against Formwise at $79.
• Mid-market: overage lands only on the accounts that cost us.
• Enterprise: a single per-page rate with no volume discount, because our cost is linear in pages.

Margin over time: at $0.0015, enterprise margin is 20% at today's cost and about 48% by late 2027 if the cost trend holds. Unlike today, revenue grows with volume.

Competitive position: $0.0015 is deliberately conservative. DocuLens's public price for Northwind's volume would be about $43,000 a month, against $7,230 under this model. We stay the cheapest option for every mid-market account too. Account V (3 seats, 346k pages) would pay $885 with us, $2,197 at Formwise and about $4,650 at DocuLens.

Enterprise renewals

Contracts can't be repriced mid-term. A January increase on "contracts" would reach only Copperfield. We move each account at renewal.

Northwind. "Same rate for two years" means unlimited pages for $38,400 a year. If their growth continues, they reach roughly 14M pages a month. Even after two more years of cost decline, that would lose us about $100k a year.

• Offer: two years at $0.0015, stepping down to $0.0013 in year two. This gives them the price certainty they want while we keep a margin on growth.
• Walk-away point: we should be willing to lose them. Northwind and Halden leaving would cut $5,800 a month of revenue but raise gross profit by $4,736 a month. That fact sets our walk-away point; it isn't a threat to put in front of them.

Arcadia already pays $0.00136 per page and is looking at a competitor.

• Offer: hold them at $54k for 12 months covering up to 3.6M pages a month, with $0.0015 above that.
• Discovery: competitors' public prices are far above ours, so we should find out what is really driving the evaluation before assuming it's price.

Phasing. Full enterprise effect arrives with the November renewal. Margin climbs through 2027 rather than jumping in January.

Self-serve rollout

1. January: new sign-ups get the new plan. Existing accounts get an in-dashboard usage meter showing their allowance.
2. Notice: existing accounts get 60 days' notice, with overage billing from April.
3. Personal outreach to five accounts: I, P, Q, T and V see increases of 58% to 198%. We contact each one and offer a committed annual page pack at $0.002.
4. Worst case: if all five churned, we lose $2,433 a month of new gross profit. Blended margin would still be about 41%.

The price test

The test doesn't support a 30% increase, for the following reasons.

1. The split is broken. It was meant to be 50/50 but came out 1,240 vs 870 visitors (59/41). The chance of that happening randomly is effectively zero (χ² ≈ 65). Something in assignment or tracking failed, possibly losing B-arm visitors who bounced. Until that is explained, neither arm's numbers can be trusted.
2. "Not significant" doesn't mean "no effect." With 104 conversions, the 95% confidence interval on the difference runs from −2.0 to +1.7 points. The data are consistent with a 40% drop in conversion.
3. The timing and measure are weak. It ran for two holiday weeks and measured first payment only, not retention or seat growth.
4. It covered the wrong customers for this decision. It tested new self-serve sign-ups at $129. It says nothing about existing customers or enterprise contracts. Enterprise buyers will ask for the evidence, and citing this test for their increase would hurt our credibility at exactly the renewals that matter.

At face value, B shows higher revenue per visitor ($6.23 vs $4.95). That makes the test worth rerunning, not acting on. A valid rerun needs:

• a fixed split;
• four or more weeks;
• 60-day paid retention as the success measure;
• the new allowance plan as one of the arms.

Compared with a flat 30%

Decisions needed

1. Approve the model and the $0.0015 enterprise rate.
2. Authorize the walk-away position on Northwind and Halden.
3. Ask Growth to diagnose the split failure before any test result is cited.

I'd like Tom in the room for the first two. His margin target is right, and this model reaches it faster and keeps it.