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AI Product Economics

Work out the cost of delivering an AI product and compare ways to charge for it.

About This Course

Introduction

A product needs to deliver something customers value at a cost the business can sustain. Model pricing is one input. Retrieval, tools, retries, hosting, support, evaluation, and human review can change the result substantially. Revenue, gross profit, operating profit, and cash each tell us something different.

We will turn an application's architecture into a unit-economics model. The teaching rates are hypothetical so you can reproduce the arithmetic without relying on a changing price page. Your workbook will compare base, heavy-use, and failure scenarios. Obtain current provider quotes before using the calculation in a purchase decision.

Review income and cash in AI Infrastructure Economics, cost per successful task in Post-Training, Adaptation, And Evaluations, and internal agent calls in Agents, MCP, And Tool Use. Start by defining the unit, then calculate direct costs, design pricing, and test which assumptions change the outcome.

Planned Lessons

  1. Choose The Economic UnitChoose the customer, request or completed task used to measure an AI product’s economics.
  2. Tokens And Model ChargesTurn the amount of text a model processes into the charges an app must pay.
  3. Inference Cost Of Goods SoldCount the direct computing costs of delivering an AI product to its users.
  4. Tools, Retrieval, And RetriesAdd the cost of searches, outside tools and failed attempts to the cost of a request.
  5. Routing And Caching EconomicsCalculate possible savings from reusing answers or choosing different models for different tasks.
  6. Seat, Usage, And Outcome PricingCompare charging per user, per amount used or per result delivered.
  7. Freemium And Free-Tier ExpenseEstimate what a free plan costs to provide and how that affects the business.
  8. Revenue, Gross Margin, And Operating ProfitFollow sales through delivery costs and running expenses to the resulting profit.
  9. Willingness To Pay And Customer ReturnConnect the price of an AI product to the benefit a customer expects from it.
  10. Acquisition, Retention, And PaybackCompare the cost of winning a customer with the money their use brings in over time.
  11. Usage Distributions And Heavy-User RiskSee how a few very active users can change the cost of offering a fixed-price plan.
  12. Quality-Cost-Latency TradeoffsChoose how to balance answer quality, speed and delivery cost for a product’s users.