Projected to Grow from $3B to $19B in the Next 12 Months
Like other organizational executives, the leaders in our Southern California Vistage peer advisory group are actively evaluating and deploying AI in their organizations. To make this research easier, Vistage offers an Artificial Intelligence Resource Center with network forums for conversations, webinars and events, speakers and more. Microsoft Copilot’s AI pricing strategy example reveals an emerging market that’s complex for users but highly profitable for organizations that unlock how to sell it.
In August 2023, our Vistage group had an interactive work session with Vistage speaker Andrew Louder, who shared his recommended approach on how to use AI to increase productivity and profits. Some of the key takeaways from the workshop that I noted included:
- First, diagnose what AI can do and assess, using a four-quadrant model (i.e., low-to-high effort, low-to-high impact)
- G2.com is like a Yelp for AI software to understand options
Since then, the Vistage companies and non-profits in our group have deployed applications in compliance for medical services, legal documentation and marketing materials, among others.
AI Pricing Strategy Example:
Microsoft 365 Copilot for Enterprise Customers
Fast forward to June 2024, and one of our leaders is investing in AI consulting services to train their manufacturing company team in both specific, tailored AI tools for highest-return areas, and also in effectively using the AI companion tool Microsoft 365 Copilot.
The version of Copilot that this organization is evaluating is for enterprise customers. Enterprise customers are typically defined as large, business-to-business (B2B) organizations, distinct from end consumers and SMBs (small and mid-sized businesses). For those who are unfamiliar with B2B segmentation, we previously explored the B2B customer segments for a financial services company.
While Microsoft 365 Copilot delivers its own unique features, much of this AI tool’s promise is to make working with the existing suite of Microsoft 365 applications, such as Word, Excel, PowerPoint and Outlook, more productive as an add-on companion product. Jared Spatovo writes,
“Copilot is integrated into Microsoft 365… It works alongside you, embedded in the Microsoft 365 apps you use every day — Word, Excel, PowerPoint, Outlook, Teams and more — to unleash creativity, unlock productivity and uplevel skills.”
Arguably, an overall tool like Microsoft Copilot is a different investment and use case than an AI tool or suite of tools targeting a particular application, such as OpenAI text-to-video tool Sora used to create the all-AI-generated commercial recently released by Toys’R’Us.

Copilot Pricing Strategy Example:
It’s Complicated
Microsoft 365 Copilot is priced at $30/month per user or $360/ year, on top of the regular Microsoft 365 subscription prices, and that doesn’t include any consulting training. According to Microsoft, 365 Copilot is only available for enterprise organizations. There are two other versions of Copilot available to other customer segments that we will explore shortly.
For the Vistage company that is considering adopting Microsoft 365 Copilot with a pilot group, this adds up to a six-figure financial investment, on the promise of achieving the productivity gains desired.
This pricing strategy example is complicated, as Microsoft has different pricing for Microsoft 365, depending on the market segment. For instance, Microsoft 365 E3 (no Teams) is $33.75 per user per month, while Microsoft 365E5 (no Teams) is $54.75 per user per month. These Microsoft 365 prices are without Copilot, which is an optional add-on. Microsoft also has distinct plans for consumers and other customer segments.
You Know What’s Not Complicated?
Microsoft’s Revenue Potential
Microsoft Copilot revenue can add up quickly. For instance, if Microsoft has 10 million Microsoft 365 Enterprise E3 customers, the incremental annual revenue potential of Microsoft 365 Copilot is $3.6 billion, if all of them pay for Microsoft 365 Copilot at $360/year.
Of course, price discounting and less-than-100% adoption will substantially reduce this estimate. Still, even factoring in 40% discounting (to $18/per user per month or $216 per year) and 50% adoption (to five million), this brings the annual revenue potential to $1.1 billion for Microsoft Copilot, for enterprise customers alone, using these estimates.
Interestingly, Jefferies analyst Brent Thill estimated Microsoft 365 Copilot revenue at $3 billion in fiscal 2024 (which ended June 30, 2024), growing to $19 billion by fiscal 2025 (essentially over the next 12 months).
Our estimate is just for the enterprise market, not considering consumers or small business. Microsoft’s 3rd quarter 2024 financials released in late April mention that Microsoft 365 Consumer subscribers now total 80.8 million, and Office 365 Commercial revenue growth was up 15%. While cloud strength receives top billing in the press release, Satya Nadella, chairman and chief executive officer of Microsoft, also highlights Copilot in these latest financial results:
“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry”
AI Pricing Strategy Example:
Enterprise Customer Perspectives
We’ve had specific experience developing messaging platforms to reach decision makers in large enterprise firms who would decide on the enterprise Copilot 365 investment. These B2B customers include senior vice presidents of IT, finance and operations at large enterprise and Fortune 500 companies, as well as C-suite CTOs. While these leaders are often asked to spend more on IT each year, they have multiple priorities, which include cyber security, cloud management and customer experience.
Looking at Copilot from an enterprise customer perspective, using the list prices, a customer paying $33.75/per user per month for Microsoft E3 (no Teams) would now pay 88% more, adding the $30/per user for Microsoft 365 Copilot, while the Microsoft 365E5 (no Teams) would pay 55% more from the $54.75/per user per month.
A spending increase of 55 to 88% will be huge in a given year, but the decision to adopt Microsoft Copilot and make this investment is underway at many companies. If we believe the Jefferies’ estimate, the next 12 months will see revenue growth from $3 billion to $19 billion.
Examples are easily found. For instance, one large Chicago regional bank is adopting Microsoft 365 Copilot for everyday office work. And, as of June, I see many AI bots taking notes in Zoom meetings I run, creating a basic transcript as a timesaver for some users.
Experts also caution of the data risks of using Copilot, here is one example given:
“R&D: A product development team uses Copilot to brainstorm new product ideas based on existing intellectual property (IP) and R&D data. The team’s input includes confidential information about upcoming patents. Copilot, lacking context on the company’s sensitivity towards this IP, incorporates detailed descriptions of these patents in its output. What if this output is then shared with a broader audience, including external partners, inadvertently exposing future product plans and risking IP theft?”
Pricing Strategy Example:
Microsoft Copilot for Other Market Segments
Moving from enterprise customers, in its store, Microsoft offers the choice of Copilot or Copilot Pro. While Copilot is free, Copilot Pro costs $20 per month. Copilot Pro helps boost the performance of Microsoft 365 apps like Word, PowerPoint, OneNote and Outlook. The below summary comes directly from Microsoft.
Microsoft Copilot Pro | Microsoft Copilot | |
Cost | $20/user/month | $0 |
Unlock Copilot in select Microsoft 365 apps | Word, Excel, PowerPoint, OneNote and Outlook | No |
Access GPT-4 Turbo for faster performance | Priority access | Non-peak times |
Create and edit images with AI (Generate unique images with DALL-E 3 and enhance your creations with Designer) | Included | Included |
Generates images faster (boosts are the number of turns you get to create images faster with Designer) | 100 boosts per day | 15 boosts per day |
Example benefits of Copilot Pro in Outlook include: “helps you draft emails with the right tone, offers suggested replies, and summarizes long threads.”
After some limited initial trial of ChatGPT and Microsoft Copilot, I preferred Copilot. I liked the fact that the sources were easily found in earlier versions of Copilot, compared with no sources in the earlier free versions of ChatGPT. More importantly, I like that my inquiries are not being used to improve the large language model (LLM). To be fair, I used earlier versions of Copilot and ChatGPT, not the most recent.
As Corsica Technologies writes,
“Microsoft doesn’t use customers’ data to train LLMs. We believe the customers’ data is their data, aligned to the Microsoft’s data privacy policy… Prompts, responses, and data accessed through Microsoft 365 Graph and Microsoft services aren’t used to train Copilot capabilities in Dynamics 365 and Power Platform for use by other customers. The foundation models aren’t improved through your usage. This means your data is accessible only by authorized users within your organization unless you explicitly consent to other access or use.”
Looking into my Microsoft 365 Family subscription, I decided to add Microsoft Copilot Pro, which offers a one-month free trial, and is $20 every month or $240 per year. I anticipate that more than $240 of benefit is possible in improved use of Microsoft PowerPoint, Word and Excel, since I use these tools (and their Google equivalents) on a daily basis. My Vistage member, who is moving forward with Microsoft 365 Copilot, found that she saved an amazing 15-20 hours a week. If she works 50 weeks each year, she’s paying Copilot $0.32 per hour to work for her.
There’s even a new dedicated Copilot key on Windows pc laptops with the Copilot logo.

If Microsoft is able to upsell just 10% of the 81 million consumer subscribers of Microsoft 365 to add Copilot Pro, that represents $1.9 billion in revenue for this segment of the market.
Undoubtedly, there are obstacles to productivity gains from AI tools like Microsoft Copilot. An important one is user resistance to change and doing work in more efficient ways. The electricity demands of AI computing pose challenges. There are many issues with improper use of copyrighted material, and experts also assess that Microsoft is moving to reduce its reliance on ChatGPT.
Despite these challenges, Microsoft Copilot appears to be a very promising pricing strategy example.
Two other pricing strategy examples that we’ve explored recently are Netflix and Microsoft Xbox Game Pass subscriptions with Call of Duty. You can also visit our resources page, or join us at an upcoming office hours.