AI Pricing and Customer Value

How CEOs should price services with AI costs while keeping value clear and customers on side.

• Microsoft’s Copilot bundling highlights risks when AI costs are hidden in pricing.

• CEOs must focus on customer value, not just cost recovery.

• Transparent pricing builds trust and strengthens long-term customer relationships.

When AI Becomes a Hidden Charge

In early 2025, Microsoft quietly raised the annual cost of Microsoft 365 Family from AU$139 to AU$179. The reason was not a change in cloud storage limits or app access, but the bundling of Copilot, Microsoft’s AI assistant, into every subscription. Families and small businesses suddenly found themselves paying nearly 30 per cent more for services they had not requested.

This triggered strong reactions online. On Reddit, one user described Copilot as “like my computer has herpes and I can’t get rid of it”. Another, in r/mac, wrote: “I’m not even interested in using Copilot, and yet I have no choice but to pay for it”. Others on r/Office365 noted that the price of business licences jumped by US$30 per month if Copilot was included, leaving many confused as to whether they were opted in or not.

The frustration is understandable. Customers are not objecting to AI as a concept. They are objecting to being charged without a clear choice or transparent communication.

Poor Price Transparency Meets Poor User Experience

Adding to the frustration is the fact that there is technically a way to downgrade to the Microsoft 365 Classic version without Copilot. But the process is buried, complex, and confusing. It requires disabling auto-renewal, waiting for the subscription to lapse, and then repurchasing the Classic plan. This is not explained clearly in Microsoft’s customer interface.

For CEOs, the lesson is clear. Poor user experience compounds poor price transparency. It is not enough to set prices fairly. You must also make it easy for customers to understand their options and take action. When customers feel tricked and trapped, their trust in your business evaporates.

Why This Matters for CEOs

For CEOs and business leaders, especially in small and medium enterprises, this episode is a cautionary tale. Your customers are watching closely. They will accept price changes if they believe the value is there. They will resist when they feel costs are being forced upon them and when the escape routes are deliberately difficult to navigate.

In my earlier article Who Keeps Their Job I argued that AI should be seen as a tool for elevating human roles rather than simply cutting them. The same lens applies here. If AI elevates the customer experience by making them more productive, more effective, or more competitive, then charging for it makes sense. If not, it feels like a hidden tax.

Who Keeps Their Job?

The AI Monetisation Phase

The Microsoft example reflects a bigger trend. AI has moved from research and experimentation into monetisation. Industry analysts estimate that Big Tech’s investments in AI infrastructure will exceed US$400 billion in 2025. These companies are now under pressure to find ways to pass those costs on. Some will do this transparently, offering new premium tiers. Others, like Microsoft, appear to be embedding costs into existing products and hoping customers accept them.

The challenge for business leaders is to avoid making the same mistake in their markets. Hiding costs might solve a short-term accounting problem, but it creates a long-term trust problem.

The Value Test for Pricing AI

Before deciding how to price services that include AI, ask three questions:

1. Does the AI feature deliver measurable customer benefit?
   Examples include reducing time spent on a task, cutting error rates, or unlocking new insights.

2. Would customers willingly choose it if it were an optional add-on?
   This is the acid test. If you offered a classic version of your product without AI, would customers still upgrade?

3. Can you explain the cost in plain language?
   If your sales team or website struggles to describe the value without jargon, your customers will struggle too.

If the answer is yes to all three, then your pricing is anchored in value. If not, you are shifting internal costs onto your customers without justification.

Why Transparency Creates Advantage

Transparent pricing does more than avoid backlash. It can be a competitive edge. When customers trust you, they will forgive price adjustments because they understand the value they receive. When they feel misled, they not only leave but often broadcast their dissatisfaction publicly, as Microsoft has just experienced.

Practical Guide for Pricing AI

1. Modular Tiers

2. Anchor Pricing to Outcomes

3. Communicate Early and Often

4. Build Internal Discipline

1. Modular Tiers

The simplest and most effective way to keep trust is to separate core services from AI-enhanced ones. Think of it as the airline model: economy, premium economy, business class. The base service remains intact, while AI functionality is presented as an upgrade.

Practical example: A SaaS platform can keep its standard reporting dashboard unchanged while offering an AI Insights package that forecasts trends or automates workflows. If uptake is strong, you know you are creating real value. If uptake is weak, you can refine the product without forcing a price increase on your entire customer base.

2. Anchor Pricing to Outcomes