How do you run a pricing migration?

THE SHORT ANSWER

Run it as a six-quarter sequence, not a switch you flip. Quarter 1 is internal alignment and four mandatory conversations (CFO, CRO, board, lead customer). Quarter 2 goes live with hybrid pricing for new accounts and a rewritten comp plan. Quarters 3 through 5 migrate customers in three waves, strategic accounts first. Quarter 6 is sunset and the new normal. The gross margin trough bottoms at 58 to 65 percent around months 10 to 12 and recovers to 70 to 75 percent by month 24. Pre-sell that curve to the board before it happens.

You cannot just switch pricing. Do it in one move and you lose half your accounts at renewal. The migration is a six-quarter operating sequence with four conversations and three customer waves, and its shape is a gross margin trough you pre-sell before it arrives.

The six-quarter sequence

  • Q1, months 1 to 3: internal alignment. Build the unit economics model, run the four conversations to first commitment, pick one bounded lead pilot SKU, and draft the contract template with general counsel.
  • Q2, months 4 to 6: hybrid live for new customers. Platform fee plus per-outcome overage. Rewrite the comp plan. The lead customer becomes a public reference that will close 30 percent of enterprise deals over the next four quarters.
  • Q3, months 7 to 9: strategic account migration. Wave 1, the top 20 accounts, CPO and CRO in the room. Legacy roadmap shrinks. Migration tooling ships. Most CPOs lose nerve here.
  • Q4, months 10 to 12: mid-market and trough bottom. Wave 2, 200 to 500 accounts. Legacy sunset date announced. The hardest quarter: trough at its deepest, team tired, board twitchy.
  • Q5, months 13 to 15: long tail and recovery. Wave 3 by public announcement and deadline. Outcome quality investments compound margin. The narrative shifts from managing the trough to scaling the new model.
  • Q6, months 16 to 18: sunset and the new normal. Final migration push, sunset tooling, post-sunset reorg planned.

The four mandatory conversations

The CFO conversation walks the trough math and agrees the leading indicators. The CRO conversation rewrites comp: legacy at 50 percent of historical, successor at 150 percent of ACV. The board conversation pre-sells the trough in quarter zero. The lead customer conversation lands the strategic account that becomes the public reference. Each takes six to eight weeks. Skip one and the transition wobbles.

The margin trough

The curve runs from an 78 to 82 percent baseline down through a bottom of 58 to 65 percent in months 10 to 12, then recovers to 70 to 75 percent by months 19 to 24. Track seven leading indicators alongside it (outcome volume per customer, gross margin per outcome, percent migrated, NPS, lead customer expansion, dispute rate, migration-to-churn ratio). They predict outcomes four to eight weeks ahead. If three or more go flat at once, the transition is in trouble.

The contract needs five non-negotiable terms: unit definition, dispute window, arbitration mechanism, committed minimum, and price ceiling. For the underlying pricing framework, see Pricing for AI Products.

Do this this week

Pick the major SKU with the clearest outcome unit. Write the unit in one sentence, estimate per-customer outcome volume, multiply by 5 to 15 percent of the customer's alternative cost, and compare to current per-seat spend. Then ask: has the CFO seen this math, has the CRO seen the comp implications, has the board been pre-sold, is there a lead customer? The answers tell you exactly what your next quarter looks like.

SOURCES

THE LONG VERSION

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Last reviewed 2026-07-31 · 3 min read