Business Core · Monetisation · Module
Pricing
What is charged, and how the level is arrived at — from cost, from competitors, or from the value delivered. The third is hardest and usually produces the best answer.
The idea
How it works
Price can be set from what it costs, from what others charge, or from what it is worth to the buyer. The first two are easy to calculate and neither has anything to do with what the customer would pay.
Value-based pricing requires knowing what the alternative costs the customer, which is research rather than arithmetic. That is why it is recommended everywhere and practised rarely.
Working with it
In practice
- 01
Establish the customer’s alternative cost
What the pain costs them today, in money or time. That number is the ceiling the price sits under.
- 02
Set the floor from cost to serve
Not just production — the full cost of delivering to this customer, including support and onboarding.
- 03
Design tiers around value, not features
Tiers that differ by feature count invite comparison shopping. Tiers that differ by value delivered do not.
- 04
Decide the discount policy in advance
Discounts negotiated case by case become the real price list within a year.
One level in
The components of pricing
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
A discount policy decided case by case becomes the real price list. Set the boundaries before the first negotiation, not after the fifth.
The other modules in monetisation
Revenue model
What the organisation charges for and on what basis. The most consequential choice in the object, and usually the least examined.
LearnMargin structure
What remains after delivery, and how that changes with volume. A business with margin at small scale and none at large scale has a structural problem, not a pricing one.
LearnRevenue quality
How predictable, recurring and concentrated the income is. Two businesses with the same turnover can be worth very different amounts.
Learn