How To Use Value Metric Pricing To Expand Revenue…

Value Metric Pricing is the go-to pricing model variant used in startups and tech companies

Here are 3 reasons why:

1/ Value Metric Pricing scales revenue in line with usage

2/ Value Metric Pricing delivers customer value in line with usage

3/ Value Metric Pricing helps to clearly categorize customer personas

…The graphic above shows why these 3 reasons combine into a powerful persona profit machine

So how can you use Value Metric Pricing for your product or service?

In many ways, a simple view into this pricing ethos is: 

– about us, 

– about the market, or 

– about the customer. So what does this mean? 

About us is where the price that you charge the customer depends on your cost base – efficiency, operational insight, supply chain management, and manufacturing expertise factor into your price.

About the market is where the price you charge the customer depends on the market. The competitive forces your company faces are the landscape of rivals and their actions. Here, the customer represents the objective on the competitive battleground.

About the customer is where the price you charge aligns with the customer value that they derive from the product or service. 

A charge that scales as they scale their value. A partner model. Customer-based pricing.

Here’s my 3 step formula:

1/ Nail the Customer Categorization:

Starter, Team, Business, Enterprise

2/ Power Law Pricing Gradients

$42 : $126 : $424 is 1X : 3X : 10X  [see power law example why this is crucial]

3/ Align with the customer value proposition

The service is related to customer support. Hence, the number of customer service calls or other actions is an excellent proxy for value delivery. 

In this case, the graduation starts at 1,000 chats scaling through 5,000 to 25,000. 

Note: by using easy graduation 1X:5X:25X, the customer coherently understands the step up.

Here’s a few more Value Metric Examples;

That's all folks.

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Monetization & Out — Gary