How to price your product/service?
Manoj Chawla
MD @ EasyPeasy Limited, Award winning Transformation & Innovation Guru, C level positions ex Accenture, BT, PWC, Diageo, ICI.
Pricing is one of the most important business decisions a company makes. It's Revenue Model makes a major impact on its profitability and growth.
When I work for clients helping them launch their business or reset; then pricing is one of the most important factors.
Whether you are a low cost airline or a supermarket, pricing is a key determinant in profitability.
Price too high and you will be left with unsold inventory, too low and you won’t maximise profit. It determines it's competitive position in the ecosystem,
There is a whole lot of economics, science, art, psychology and behaviour economics in how companies come up with their price.
Here are some models be it for software, physical products, services.
By understanding and applying these various pricing techniques, businesses can effectively maximize their revenues, better serve their customers, and gain a competitive edge in the market.
1. Versioning:
?? ?Basis: Catering to different segments of the market by creating multiple versions of a product with varying features.
?? ?Example: Software with "basic," "professional," and "enterprise" versions.
2. Bundling:
?? ?Basis: Combining multiple products together to increase perceived value.
?? ?Example: Cable TV packages.
3. Metering:
?? ?Basis: Charging based on usage levels to align price with the value received.
?? ?Example: Cloud storage services.
4. Group Pricing:
?? ?Basis: Offering different prices to different groups with varying price sensitivities.
?? ?Example: Educational discounts for software.
5. Network Externalities:
?? ?Basis: Lowering initial prices to build a user base and leverage increased value over time.
?? ?Example: Social media platforms.
6. Dynamic Pricing:
?? ?Basis: Adjusting prices in Realtime based on demand and market conditions.
?? ?Example: Airlines and hotels.
7. Freemium:
?? ?Basis: Offering a basic version for free and charging for advanced features.
?? ?Example: Dropbox and Spotify.
8. Cost Based Pricing:
?? ?Basis: Pricing based on the cost of production plus a markup.
?? ?Example: eBooks and software.
9. Peak Load Pricing:
?? ?Basis: Charging higher prices during periods of high demand.
?? ?Example: Internet service providers during peak hours.
10. Price Discrimination:
??? ?First-degree: Charging each customer their maximum willingness to pay.
??? ?Second-degree: Prices vary according to the quantity consumed or product version chosen.
??? ?Third-degree: Different groups are charged different prices.
??? ?Example: Discount coupons, quantity discounts, student pricing.
11. Pay Peruse:
??? ?Basis: Charging based on the amount of service used.
??? ?Example: Utility services, cloud computing platforms.
12. Two-part Tariffs:
??? ?Basis: Combining a fixed fee with a variable usage fee.
??? ?Example: Mobile phone plans with fixed monthly fees plus charges for extra data.
13. Complementary Pricing:
??? ?Basis: Pricing a core product low and complementary products higher.
??? ?Example: Printers and ink cartridges.
14. Intertemporal Pricing:
??? ?Basis: Changing prices over time, starting high and lowering as the product ages.
??? ?Example: New technology products like smartphones.
15. Auctions:
??? ?Basis: Using auctions to determine prices based on customer bids.
??? ?Example: eBay, ad slots on Google.
领英推荐
16. Subscription Based Pricing:
??? ?Basis: Charging a recurring fee for ongoing access.
??? ?Example: Netflix, SaaS products.
17. Advertising Supported Model:
??? ?Basis: Offering products for free or at a reduced price, funded by advertising revenue.
??? ?Example: Free social media platforms.
18. Personalized Pricing:
??? ?Basis: Tailoring prices to individual customers based on data.
??? ?Example: Online retailers offering personalized discounts.
19. Penetration Pricing:
??? ?Basis: Setting a low initial price to attract customers and gain market share.
??? ?Example: New streaming services offering low subscription rates initially.
20. Skimming Pricing:
??? ?Basis: Setting a high initial price to maximize revenue from early adopters, then lowering it over time.
??? ?Example: New high-tech gadgets.
21. Geographical Pricing:
??? ?Basis: Different pricing for different geographic regions.
??? ?Example: Software priced differently in various countries.
22. Psychological Pricing:
??? ?Basis: Pricing that considers psychological factors, such as setting prices just below a round number.
??? ?Example: Products priced at $9.99 instead of $10.
23. Value Based Pricing:
??? ?Basis: Setting prices based on the perceived value to the customer rather than cost.
??? ?Example: Luxury goods, high-end electronics.
24. Pay What You Want:
??? ?Basis: Allowing customers to choose their price, often used with suggested prices.
??? ?Example: Some online games and music albums.
25. Freemium Plus:
??? ?Basis: Offering free basic services and charging for advanced features, often with additional premium tiers.
??? ?Example: Mobile apps with free, pro, and enterprise versions.
26. Razor and Blade Model:
??? ?Basis: Selling the main product at a low price and charging high prices for consumables.
??? ?Example: Razors and replacement blades.
27. Loyalty Pricing:
??? ?Basis: Offering discounts or better prices to loyal customers to encourage repeat business.
??? ?Example: Loyalty programs in retail stores.
28. Event Based Pricing:
??? ?Basis: Adjusting prices based on special events or seasons.
??? ?Example: Holiday sales, Black Friday discounts.
29. Time Limited Discounts:
??? ?Basis: Offering temporary price reductions to stimulate demand.
??? ?Example: Flash sales, limited time offers.
30. Tiered Pricing:
??? ?Basis: Offering different pricing tiers based on the level of service or product features.
??? ?Example: Software with basic, standard, and premium plans.
31. Anchor Pricing:
??? ?Basis: Presenting a higher priced option to make other options appear more attractive.
??? ?Example: High-end products placed next to midrange products to make the latter seem like better deals.
32. Dynamic Segmentation:
??? ?Basis: Continuously adjusting prices and segments based on Realtime data.
??? ?Example: Ecommerce sites using AI to personalize prices and offers.
33. Pay per Outcome:
??? ?Basis: Charging based on the results or outcomes achieved by the customer.
??? ?Example: Marketing agencies charging based on performance metrics like leads generated.
If you want to explore your pricing/revenue model just message me I will be be happy to have a chat.
MD @ EasyPeasy Limited, Award winning Transformation & Innovation Guru, C level positions ex Accenture, BT, PWC, Diageo, ICI.
8 个月https://winningbydesign.com/revenue-architecture/chat/
MD @ EasyPeasy Limited, Award winning Transformation & Innovation Guru, C level positions ex Accenture, BT, PWC, Diageo, ICI.
8 个月Other useful resources you can find are people like ?? Jacco van der Kooij He has a great AI powered tool based on his book. Here is an example of its output There are several different types of pricing strategies outlined in the Revenue Architecture textbook: Ownership Model: Customers purchase and own products outright by making an upfront payment. Examples include goods like cars, furniture, or electronics[1]. Subscription Model: Customers pay a recurring fee to access a product or service over an agreed period. This model is prevalent in streaming services, SaaS, and membership programs, offering continuous access as long as the subscription is maintained[1]. Consumption Model: Customers are billed based on their actual usage of a product or service. This approach is common in utilities like electricity or water, where customers are charged according to their consumption levels[1]. These pricing strategies have unique characteristics that impact revenue growth, resource allocation, cost structure, and business valuation[1]. [1] Revenue Architecture pg 135 [2] Revenue Architecture pg 135 [3] Revenue Architecture pg 135 [4] Revenue Architecture pg 135