Price Floor

The minimum price that can be charged. In economics the term means a legally imposed minimum, with minimum wage as the standard example. In B2B software the hard floor is cost: below it the deal loses money. For traditional software, marginal cost is near zero, so that hard floor sits far beneath any price a company would accept, and the floor that actually binds is set higher, at the minimum net price that protects target margin. AI software is the exception: inference cost is real and scales with usage, so the cost floor rises and moves closer to the price, and cost re-enters a pricing conversation that software had spent decades ignoring. This operative floor is one of the limits the pricing model exists to define, alongside maximum discounts and approval requirements, and it shows up in two forms that behave very differently. A policy floor lives in the discount approval matrix: land below this net price and the deal needs a manager, a VP, then the CFO. A structural floor is engineered into the pricing surface itself, where the slope is calibrated so that no commitment level produces a scheduled net price that erodes margin below target, which means there is no legitimate path to a below-floor deal to approve in the first place. Most companies run policy floors, and most policy floors erode: the exception granted to close the quarter becomes the precedent the next deal cites, approvals turn into rubber stamps, and the operative floor settles below the stated one without anyone deciding it.