Pricing Models and Strategies

I guess I’ve had pricing and profits on the brain lately. 

First, there are consulting contracts to negotiate, then there are other consultants who need help with pricing and most importantly, my clients are dealing with daily pricing and value questions. 

All of this has me thinking about price, value, distribution, offering and most importantly, profitability.  In my last post, I talked about several different ways to help your customer perceive more value.  Today, I’d like to talk about some different pricing models that I’ve seen, thought about and experienced.

The Long Tail strikes again.  Chris Anderson, author of the "Long Tail" has an interesting post that not only talks about the new realities of what I’ll call the Long Tail Pricing Model, but he’s actually showing all of us how you can do some quick and dirty pricing research. 

Here are some ways that newspapers and other on line media use the Long Tail Pricing Strategy – FREE.

Paying on People Performance:  This is a question from a LinkedIn user. (you may need to be a registered LinkedIn user to see the whole thing).  Here a recruiter asks about a pricing model where the client only pays if the person actually is a good hire over time.  For example.  If they hire a sales rep who brings in $10 million and the reps commission is $1 million.  The recruiter will receive 20% ($200,000 as long as that rep is at or above his goal)  WOW.  That’s risky!  I also see a lot of room for playing with the numbers if a company is not very ethical.

On line Marketing Pricing Models. "Don’t confuse marketing pricing models with business pricing models." WOW – that is a powerful statement.  Think about this.  A marketing pricing model makes it easier for your target customer to choose you.  These would include free experiences that will let the customer see if this is a good choice for them.  If they like it, they can move on to a paid, premium service with more functionality and capability.  While a business model is more about a pricing philosophy, it’s a pricing model that makes it easy for customers that have already chosen you to stay with you.

Here’s the lesson.  Whatever you learned about pricing; remember it’s all about delivering value, delivering the promise of your brand and creating a win-win relationship with your customer.

You have to be happy enough with your price to enthusiastically deliver the value and the customer has to be even happier and feel like they got more for their money.