Pricing Models

“Add-on”: One model from the St. Gallen Business Model Navigator suggests “add-on” pricing, which provides a base price for a basic service and surcharges for extras that allow customers to customize the service according to their needs.

Examples include Ryanair and SAP.

“Auction”: Let your customers determine the price they are willing to pay. Depending on the market and product, you can auction off your services.

Examples are MyHammer and Priceline.

“Barter, Hidden Revenue”: Products can be given to customers without payment if it returns other value.

Examples include Google and Facebook.

“Flat rate, Subscription”: Think about a fixed price, regardless of the intensity with which customers make use of your offer. Your customers benefit from predictable costs, you from predictable revenues.

Examples include Netflix and providers of phone services and software cloud solutions.

“Affiliation”: A further model lies in the provision of a sales platform through which third parties can sell their offerings. The platform provider profits from every transaction that third parties conclude with each other.

Examples of this are Amazon Store and Pinterest.

“Pay per Use”: You could offer your customers the possibility of paying exactly for the service they use. Customers will pay a premium for the increased flexibility.

Examples include cab services, Car2Go and cell phone contracts.

“Pay what you want”: You could tell your customers that they can pay what they want for a given service. In some cases, you may even get higher payments than if you set a price.

An example of this is a contribution to a charity cause or recognition of a musical performance or theatrical performance.

“Freemium”: You offer a basic version of your service for free and can attract many users. For those users who need more, you offer paid premium versions.

Example: Dropbox.

“From Push to Pull”: Customers call up products and information. This pull principle prevails throughout the entire value chain. As a result, flexibility is gained.

Examples include Toyota and Dell.

“Performance-Based Contracting”: Can you imagine not handing over your products to your customers against payment of a purchase price, but instead receiving a usage- and performance-based monthly fee? The product, such as a machine, could also remain your property and you could even operate this machine(s) on your customers’ premises.

Examples include Elopak, Tetrapak, and also copier suppliers such as Xerox.

“Razor and Blade”: You could sell the main core product at very favorable terms or even give it to customers for free. You generate revenue with specific consumables or extra materials that are required to run your product. The sales of these consumables cross-finance the core product.

Examples include Gillette, Nestlé Nespresso, Apple iPod, and printer manufacturers like hp and Xerox.

“Rent instead of Buy”: Could you imagine renting your products instead of selling them? You can refinance through trade financiers. You give your customers a liquidity advantage that you can pay for on your bottom line.

One example of this is Xerox.

“Robin Hood”: Vary your prices based on customers’ ability to pay. A small mid-sized business is not likely to be as solvent as a corporation.

Consulting firms are an example.

“Ultimate Luxury”: Check whether you want to and can differentiate yourself by delivering exclusively to a premium segment. You can achieve the highest quality standards and exclusive privileges through significantly higher prices paid by the premium segment.

Examples of this are Bentley and Lamborghini.

“Self-service”: Involve your customers (optionally) in the value creation process and, in return, accommodate them in terms of price. This allows you to lower your entry prices.

Examples include IKEA, providers of online configurators and online sales platforms.

“Two-Sided Market”: Marketplaces enable revenues from buyers and from sellers. Check your business model for such opportunities.

Examples include eBay and MyHammer.


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