AI is changing how companies price, but are tokens and credits bringing back the same old cost-plus mistakes? In Episode 610, Ron Baker and Ed Kless explore why customers buy a better tomorrow—and why charging for effort misses what they value.

The conversation ranges from price transparency to the limits of outcome-based pricing when “outcome” means only measurable profit. Peace of mind, trust, and transformation matter, too. Ron and Ed also examine where AI can strengthen pricing decisions and why strategy, imagination, and human judgment remain essential. When everyone has AI, what will still make your offering different?

SHOW NOTES

SEGMENT ONE

Tien Tzuo warns that AI is dragging vendors back to cost-plus pricing, which charges for effort and caps your upside at your costs: “Nobody wakes up wanting to buy tokens.” Ed adds that every problem with the billable hour in Ron’s The Professional’s Guide to Value Pricing also applies to token pricing.
Mark Stiving and Steven Forth ask why we need pricing models at all if AI agents can negotiate for buyers and sellers. Their answer is that prices carry information about value, scarcity and innovation potential: “The tension between the buyer and the seller is not a bug, it’s the engine.”
“Well, duh, value is subjective.” Pricing writers dance around it, but few will say outright that value is 100% subjective and not intrinsic to anything.
Price transparency means the buyer knows the price before saying yes, and it’s essential. Pricing transparency means explaining how you arrived at the price, and it isn’t. Ed’s urgent-care story shows that when a business skips the first, customers end up demanding the second.

SEGMENT TWO

Mark Stiving: “Credits are a confession that a company has not yet found where its value lies.” Credits are a made-up currency the company can change at will, like floating the ruler every day. Token pricing is like a restaurant charging by the gram.
Outcome-based pricing that only counts what lands on the buyer’s profit is far too narrow. Peace of mind is a real outcome that supports the entire insurance industry, and nobody ever got fired for buying IBM.
Danilo Zatta says AI may destroy margins by making offerings easier to compare, which pushes advantage toward trust, brand, experience and emotional connection. He asks, “When everyone has AI, what will still make us different?” The hosts’ answer is your offering: goods and services, experiences, or transformations.
Zatta again: “An algorithm cannot optimize a pricing strategy that does not exist.” Pricing teams once worshiped elasticity and now worship AI, yet “customers do not buy prices, they buy stories.”

SEGMENT THREE

From one of Ron and Ed’s AI-drafted Reflection & Response pieces: “Customers rarely buy effort with enthusiasm. They buy a better tomorrow.”
Many of the best business decisions, like Netflix, Apple, Tesla and Amazon, looked stupid at first, and none came from historical optimization. AI learns from history, and “average excellence is still average.” Judgment, imagination and contrarian thinking have to stay human.
“Pricing is not physics. Gravity doesn’t negotiate. Customers do.” Once you publish a price, the market reacts to it, and “prices do not measure demand. They create it.”
AI can optimize within a pricing strategy, but it can’t choose the strategy, because pricing is downstream of strategy. Instead of asking AI for the optimal price, ask for the most interesting one. If AI is right 95% of the time, who’s going to challenge it?

SEGMENT FOUR

The Economist’s Bartleby column celebrates “the greatest advance in consulting since the quadrant”: a young consultant who added a fifth box to the 2x2 and called it the quindrant.
Rainer Zitelmann, writing for FEE, argues that empathy rather than greed drives capitalism. Ed counters that what Zitelmann describes, understanding another person’s feelings and motives, is sympathy. Empathy means feeling their pain yourself.
If the iPhone had flopped, would that mean Steve Jobs lacked empathy? Products are theories, and innovators don’t simply deliver what customers think they need. They don’t build a faster horse.
Artists project their own view of the world, but entrepreneurs have to focus on the customer’s. That’s why Stanley Marcus’s father started him in the shoe department, kneeling in front of every customer.

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

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