What Product Teams Can Learn from Finance Industry in Pricing
Bridge Market Appetite with Margin Integrity
The Pricing Gap
Digital product pricing - particularly for SaaS, PaaS, subscription platforms and API-delivered services - is often treated as a negotiation between customer feedback, competitive analysis and perceived value. This leads to tiering models shaped by buyer personas or usage heuristics. The finance world, by contrast, starts from a different premise, pricing must cover costs, return expectations and risk - not just appeal to market demand. Price is not simply what someone is willing to pay, it’s what a business needs to justify continuous investment and survive volatility.
Financial institutions model this through methods that are traceable and verifiable; cost of capital, hurdle rates, risk-adjusted segmentation, cost attribution and lifecycle depreciation. These are not abstract sentiments, they're the structural scaffolding behind every credit product, insurance premium and investment-grade offer. Product leaders can borrow these fundamentals to enforce pricing discipline and whilst these finance principles provide guardrails, they should aim to complement - not replace - insights gained from market dynamics, customer willingness to pay and behavioural economics. Ultimately the mechanics of a product needs cost realism, risk segmentation and contribution clarity in addition to its competitor benchmarking or conversion tactics.
1. Structural Discipline: From Market Appetite to Margin Integrity
Finance Principle: In finance, every product or investment must generate a return that exceeds its cost - including operational cost, capital cost and risk. This is calculated using models like hurdle rates or cost-of-capital thresholds.
What That Means: You don’t price based on what users will pay. You price based on what it costs to serve them and what your investors or financial backers expect to earn. Pricing below that threshold destroys value, even when revenue is growing.
Product Parallel: If your SaaS product costs €3.50 per user per month to deliver and your business expects a 20% return, the minimum viable price is €4.20. Selling at €3 may benchmark well and win more users, but quietly undermines your ability to fund development or scale revenue.
General Rule: Temporary underpricing - like in a freemium strategy - can be justified, but only if it’s planned, time-bound and funded by another part of the business.
2. Segment-Based Packaging: From Features to Value Clusters
Finance Principle: In credit and insurance, customer segments are defined by risk and return, not by demographics or superficial traits. Pricing adjusts based on risk exposure, potential return and servicing cost.
What That Means: Two customers might pay the same fee but deliver very different outcomes. One might require costly support, custom terms or frequent interventions. Financial institutions model this to prevent hidden loss at the segment level.
Product Parallel: Suppose two customers each pay €100/month. One raises no issues. The other opens five support tickets a month, requires custom integrations and churns after six months. That’s not the same value. Product should package and price based on segment contribution - not personas.
General Rule: UX personas are useful for design and GTM - but they should not substitute for economic clustering in pricing.
3. Cost Attribution Models: Make Hidden Costs Visible
Finance Principle: In managerial accounting, costs are allocated to specific products, business units or customer types. This enables visibility into which parts of the business are actually generating margin and which are simply riding along.
What That Means: Without detailed cost attribution, revenue figures offer false confidence. Finance disciplines separate direct and indirect costs to identify underperforming assets and make strategic decisions.
Product Parallel: Imagine a new analytics feature boosts engagement, but also accounts for 40% of support volume and increases infrastructure usage by €0.80 per active user. Without tagging and attribution, this drag stays invisible and product benefit is misaligned to new value.
General Rule: Acute precision isn’t required. But roadmaps that don't include a view of cost per feature or customer type risks blind margin erosion.
4. Revenue Predictability vs. Flexibility: Strategic Choice, Not Accident
Finance Principle: Predictable income, like fixed-rate bonds or long-term contracts, lowers risk and improves valuation. Companies with stable, recurring revenue can secure cheaper capital and plan confidently.
What That Means: Financial models reward forecastability. Inconsistent or volatile revenue makes a business harder to fund and more expensive to scale, even if top-line growth looks healthy.
Product Parallel: One product uses annual contracts with built-in escalators. Another runs usage-based billing with monthly churn. The latter grows faster, but finance teams lean into the former when allocating headcount and investment, because it's more accurately modelable with less risk.
General Rule: Finance values revenue stability because predictable income attracts cheaper capital and makes planning easier. In contrast, usage-based models can grow fast but complicate forecasting and budgeting. Both play roles: flexibility aids experimentation, but scaling requires predictability.
5. Cross-Subsidy & Portfolio Logic: Strategic Unprofitability
Finance Principle: In portfolio management, not every product needs to be profitable, but unprofitable products must be funded by higher-return positions. This is how mutual funds, insurers and conglomerates manage strategic bets.
What That Means: It’s common to run some offerings at a loss, like loss leaders or long-tail experiments, but only if other parts of the portfolio can carry them and the trade-off is intentional and measured.
Product Parallel: Imagine your enterprise platform generates high-margin ARR. A free mobile tool doesn’t. If the mobile app converts 5% of users into high-value accounts, it can be justified, but only if that conversion rate is measured and visible.
General Rule: Many product teams fall into accidental subsidy. Without portfolio-level visibility, high-return lines get weakened by low-return distractions.
6. Pricing as Signal: Price Communicates Value and Risk
Finance Principle: In financial markets, price reflects risk. Higher interest rates often signal higher default risk. Conversely, low yields suggest security and stability. Pricing isn’t just transactional, it’s also a signal.
What That Means: A low price can communicate instability or low quality. A high price can signal trust, reliability or premium positioning. This signalling function is intentional in finance and often modelled explicitly.
Product Parallel: A B2B API provider lowers pricing to banner-grabbing €9.99/month to drive adoption. Instead, enterprise clients interpret it as immature and risky, choosing more expensive competitors instead. Price damaged perception.
General Rule: Signal effects depend on context. In some markets, low prices are seen as disruption; in others, as corner-cutting. Treat pricing perception as a variable, not an afterthought.
7. Lifecycle Thinking: Plan for Product Retirement
Finance Principle: Assets lose value over time. In finance, this is accounted for through depreciation or amortisation. It reflects both declining utility and rising maintenance costs.
What That Means: Financial systems plan for asset retirement and reinvestment. Holding onto outdated assets inflates cost and suppresses return, even if those assets are technically still functional.
Product Parallel: A product team continues supporting a feature built five years ago for a single enterprise client. It now serves less than 2% of other users it was rolled out to but consumes 10% of engineering hours. Without a lifecycle plan, the feature quietly erodes velocity and value.
General Rule: Product features don’t always decline linearly like physical assets. But ignoring lifecycle cost guarantees compounding inefficiency. Retirement and refresh cycles should be baked into planning.
Product as Economic Architect
You don’t have to become a finance expert. But it helps to understand why your finance team won’t back a plan that simply trades value with volume, or margin for motion. Pricing isn’t just monetisation - it’s a commitment to the economics that sustain your product, your business.
Finance models in themselves aren't perfect for all products, but they do remind you: pricing without discipline is the early formulation of wishful thinking.