Game Changer

CHAPTER 6What's Next? The Design of Pricing Models

A company's entire revenue is the outcome of its pricing decisions. This makes pricing strategy indispensable. A leadership team's decisions on how to share value with customers not only determines the financial performance of a company and its ecosystem, but also affects the medium‐ and long‐term shape of markets: Who gains customers, who is best positioned to serve them and retain them, who stays in the market, and who leaves?

A company's pricing strategy also influences a company's decisions on where to invest, whether in innovation, capacity expansion, market communication, or mergers and acquisitions. It is not something that a leader should select from an à la carte menu or accessorize with a trendy approach. The impulse or idea to “add a subscription” or “go dynamic” may sound appealing, but it needs to emerge organically from the Strategy Hex, not the loudest voice in the room, the insistence of the data scientists, or the success of a company in another sector.

Let's now focus on the third question for the development of a pricing strategy: What pricing model best fits your value creation strategy?

Exploring price models does not mean that we will dive into the mathematical mechanics that go into the precise determination of the price points. Instead, we will stay on the strategic plane – above the numbers – and help ...