Raise prices for Bengaluru inventory software?
Before the decision
Support hours per account increased after the team added workflow automations. The founder promised early customers a simple plan and responsive support. Some now use only the inventory module while others rely on the team to troubleshoot custom workflows.
Read the companion story: The price rise that pays for itself
The problem
Should the team choose New list price or Tiered plan for the next 12 months?
Decision owner: The business unit lead.
Annual contracts delay visible churn and discounts can conceal true willingness to pay.
Option economics
Scroll the table to see all figures.
| Option | Volume (account-months) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| New list price | 35,000 | 540 | ₹75 lakh | ₹114 lakh |
| Tiered plan | 39,800 | 460 | ₹77 lakh | ₹106.08 lakh |
Make the call
- Calculate net contribution for New list price and Tiered plan. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer account-months, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating New list price. It contributes ₹114 lakh after fixed costs and leads by ₹7.92 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Compare contribution after the volume response. A better margin on each sale can be offset by lost transactions, downgrades or cancellations.
- Calculate both options
New list price: 35,000 account-months × ₹540 less ₹75 lakh in fixed costs gives ₹114 lakh. Tiered plan: 39,800 account-months × ₹460 less ₹77 lakh in fixed costs gives ₹106.08 lakh.
- Stress-test the forecast
New list price leads by ₹7.92 lakh in the base case. If New list price delivers 10% fewer account-months (31,500) at the same margin and fixed cost, it contributes ₹95.1 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, New list price needs at least 33,534 account-months to match or beat it under the model. Use renewal cohorts and count downgrade as a price response.
Annual contracts delay visible churn and discounts can conceal true willingness to pay. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | New list price | Tiered plan | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹95.1 lakh | ₹87.77 lakh | New list price |
| Base assumptions | ₹114 lakh | ₹106.08 lakh | New list price |
| Both gain 10% of volume | ₹132.9 lakh | ₹124.39 lakh | New list price |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.
Practise this case as an interview