Pricing Migration: The 18-Month Quarterly Playbook

The cannibalization decision frames the strategic call. Dual transformation runs the operating rhythm. This chapter runs the actual pricing migration: six quarters, quarter-by-quarter, with the conversations and contract terms that decide whether the transition works.

The companion essay The Pricing Migration Sequence carries the full rhetoric. This chapter carries the operating practice.

The eighteen-month sequence at a glance

Each quarter's failure modes and key outputs are below.

Quarter 1: Internal alignment

Invisible from outside the company. Four things must happen.

1. Build the unit economics model for each major SKU: per-seat baseline, per-outcome scenarios (conservative, expected, aggressive), gross margin per outcome including inference and escalation cost.

2. Run the four conversations to first commitment. CFO (trough math), CRO (comp plan in draft), Board (30-minute slot in next quarterly review), Lead Customer (strategic account willing to pilot).

3. Pick the lead pilot SKU. One workflow. Bounded, frequent, measurable.

4. Draft the contract template with general counsel. The five non-negotiable terms (below). Budget six weeks for three drafts.

Failure modes: CFO unconvinced and you proceed anyway. Lead pilot too narrow. Unit definition fuzzy.

Quarter 2: Hybrid live for new customers

The pilot is signed. The board has committed to the trough. The unit economics held up.

1. Hybrid pricing live for new customers. Platform fee plus per-outcome overage. Committed minimums protect the forecast.

2. Comp plan rewrite published. Legacy at 50% historical, successor at 150%, renewal accelerators on legacy gone, migration accelerators on successor introduced. The CRO will push back on 50%. Hold the line.

3. Lead customer becomes a public reference. Logo, quote, outcome numbers. This single reference will close 30% of enterprise deals in the next four quarters.

4. CS retraining begins. Dispute mechanism, new SLAs, outcome-quality dashboard.

5. First public board acknowledgment of the trough. Three slides: the change, the curve, the leading indicators. Establish the format that runs every quarter for 24 months.

Failure modes: comp plan watered down. Lead reference delayed by procurement. CS not retrained.

Quarter 3: Strategic account migration

This is where the transition starts to feel real. Most CPOs lose nerve here.

1. Wave 1 migration: top 20 strategic accounts. CPO, CRO, account team meet with each customer. 90 minutes plus follow-up. Sixty-day project.

2. Legacy roadmap shrinks. Engineering at 70/20/10 (successor / migration tooling / legacy maintenance). Legacy stops getting feature work.

3. Migration tooling ships. Self-service dashboard projecting outcome-pricing bills. One-click migration with committed minimum based on historical usage.

4. Pricing experiments begin. Inference costs are dropping faster than expected. Run two cohorts at different price points. The Jevons cliff is real.

5. Trough visible on financials. Blended gross margin around 65-68%. Down from 80% but not catastrophic. Stay calm publicly.

Failure modes: strategic account migration delegated to account managers. Legacy roadmap shrinks too fast. Sloppy pricing experiments.

Quarter 4: Mid-market and trough bottom

The hardest quarter. Trough at its deepest. Team tired. Board twitchy.

1. Wave 2 migration: mid-market. Structured email, webinar series, self-service tooling. 200-500 customers in a quarter.

2. Legacy tier sunset date announced. Internal first, then external. Sunset is 12 months out.

3. Q4 board update. Trough at bottom. Blended gross margin 58-62%. Show the recovery curve. Walk through what month 18 looks like. Maintain the narrative.

4. CFO's seasonal forecast. Outcome revenue is variable. CFO needs to model seasonality, cohort behavior, inference cost curves. FP&A tooling upgrades.

5. Internal morale management. Show leading indicators. Celebrate strategic account references. Run an internal Q&A.

Failure modes: the board panics. CFO models can't keep up. Internal morale cracks. CRO hints at slowing down.

Quarter 5: Long tail and recovery

Recovery starts. Outcome volume scales. Inference amortizes.

1. Wave 3 migration: long tail. Public announcement, deadline. Self-service only. Some churn is expected and acceptable.

2. Outcome quality investments. Better evals, better routing, better escalation handling. Each quality improvement compounds margin.

3. Pricing experiments mature. Decide: hold prices and capture margin, or pass savings and capture share. Document the decision.

4. CS rebuilt around outcome quality. CS owns outcome SLAs, dispute resolution, customer education.

5. Q5 board update. Trough past. Margin recovering toward 65%. Outcome revenue at 60%+ of total. Narrative shifts from "managing the trough" to "scaling the new model."

Failure modes: sloppy long-tail migration creates negative public reviews. Quality investments deprioritized for new feature work.

Quarter 6: Sunset and the new normal

Legacy has a published sunset six months out. Migration mostly complete. Successor is the company's primary revenue driver.

1. Final migration push. Personal outreach to remaining customers. Some migrate, some churn, some negotiate one-year extensions on legacy at premium pricing (accept these; they're cash on a known end date).

2. Sunset prep. Engineering builds sunset tooling: data export, account closure, final billing.

3. Post-sunset reorg planning. Maintenance team's roles end at sunset. Plan now. Communicate transparently in month 17 with sunset in month 21.

4. Q6 board update. Trough past. Margin at 70%+. Outcome revenue at 75%+ of total. NRR on agent product 130%+.

5. The new operating normal. Dual transformation collapses to a single operating model focused on the agent product.

The five non-negotiable contract terms

Without these, you have a billing dispute pipeline waiting to happen.

Unit definition

What counts as a "resolved ticket" or "qualified meeting" or "accepted code review." Specific. Measurable. Defensible. The hardest work of the contract template.

Dispute window

How long the customer has to flag a disputed outcome. Common: 14-30 days from the billable event. Shorter than 14 days is unfair to the customer. Longer than 30 days creates billing chaos.

Arbitration mechanism

Who decides when there's disagreement. For most B2B products, internal review by a senior CS lead, then escalation to a customer success VP, then escalation to a third-party arbitrator if needed. Define the path before the first dispute.

Committed minimum

The floor under your forecast. Most enterprise customers will commit to 60-80% of their projected outcome volume as a minimum. This converts your variable revenue into something forecastable.

Price ceiling

So the customer isn't exposed to runaway volume costs. Common: 130-150% of the forecasted volume capped at the price tier. The ceiling protects the customer's CFO and makes procurement easier.

The gross margin recovery curve

Pre-sell this curve to the board in quarter zero. Reinforce every quarter.

The seven leading indicators

Track these alongside the curve. They predict outcomes 4-8 weeks ahead.

1. Outcome volume per customer (climbing).
2. Gross margin per outcome (climbing).
3. Percent of legacy revenue migrated (climbing toward 100%).
4. NPS on the successor (steady or climbing).
5. Lead customer reference expansion revenue (climbing).
6. Dispute rate (falling).
7. Customer migration to legacy churn ratio (climbing).

If three or more are flat or falling at the same time, the transition is in trouble. Run the quarterly reality check from the dual transformation chapter.

What to do this week

Pick the major SKU with the clearest outcome unit. Write down the unit in one sentence. Estimate per-customer outcome volume. Multiply by 5-15% of the customer's alternative cost. Compare to current per-seat spend.

The ratio is your starting point. Now ask: has the CFO seen this math? Has the CRO seen the comp implications? Has the board been pre-sold on the trough? Is there a lead customer for the pilot?

The answers tell you exactly what your next quarter looks like.

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The companion blog essay is The Pricing Migration Sequence. The Pricing Migration Quarterly Tracker is at /toolkit/pricing-migration-quarterly-tracker. The Margin Recovery Curve Model is at /toolkit/margin-recovery-curve-model. For the pricing framework that underlies this migration, see /handbook/pricing-for-ai-products and /blog/per-outcome-pricing(coming May 18).