Published: 22 May 2024
Value-based pricing grows revenue along with customer value, but when combined with pay-as-you-go pricing, consumption models meet resistance from buyers unsure of future demand. Three steps can help product managers combine VBP with tiered approaches to best align value and predictability.
Because identifying value metrics is difficult, pricing based on traditional measures, such as numbers of users, often conflicts with value propositions, erodes differentiation and stalls growth.
Consumption-based pricing models are trending, but the unpredictable nature of use poses a risk to customers’ budgets and providers’ revenue projections.
Unexpected use situations, such as a one-time-event spike in traffic, are a common occurrence and can place significant cost risks on customers and providers alike.
Select a pricing metric or combination of metrics that serve as a proxy for expected customer business outcomes (value), and then test for scalability and growth scenarios.
Define volume-based
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