Usage-based pricing has emerged as a critical component in pricing design. Important in its own right, it is also a step on the path to the Holy Grail of pricing - outcomes based pricing. Success requires new skills around prediction, value paths and customer success.

When sales comes to you asking for discounts or demanding price cuts do not blame them. Ask yourself, have you helped them communicate value and then document the value delivered? Value-based pricing begins with value, not pricing. If you want your sales team to execute on a value based strategy you need to support them.

Too many companies negotiate a price during the sales process and then forget about it. This is a recipe for failure. Pricing and value are closely connected. The pricing-value conversation continues across the customer journey. Keeping this conversation current is how to drive renewal, cross sales and upselling.

Service-led growth is driven by a positive feedback cycle. This cycle has a lot in common with the cycle that leads us to form good (and bad) habits. A concept blend of service-led growth and the habit cycle gives new insights into how to make service-led growth work.

In early May 2021 Karen Chiang and Steven Forth gave a two day workshop on applications of the strategic choice cascade to pricing. The case study featured a choice on data monetization for a precision agriculture company. Different winning aspirations led to very different pricing strategies.

Ibbaka is a highly collaborative company. We work to build a community of people and organizations committed to creating and delivering value, whether that be economic, emotional or pricing. Some of our work is on pricing. Some is more focussed on innovation. In all cases we are looking to help people develop their skills. One way we do this is through our collaborations with the venture capital firms Arthur Ventures and OpenView Venture Partners.

Nir Eyal’s Hook model of how to build habit forming software solutions can also be applied to service led growth. The goal of service led growth is to internalize the the triggers that lead to actions, make the rewards more predictable, and to build up data and shared skills to generate the insights that will act as triggers for additional engagements.

The worst pricing decisions are random pricing decisions that stick and become frozen accidents.

The final choice in the strategic choice cascade is the systems you will need around the value cycle. As you design the systems that support your pricing strategy, take a holistic approach to the systems you will need to enable success.

Usage-based pricing is a best practice and a key step towards outcomes-based pricing. This sounds good, but what usage? Should any click be used for the usage metric that becomes part of the pricing model? Value paths are are a sequence of actions that lead to value. They are different from but related to value streams. Identifying value paths and then making them part of your pricing model is the key to usage-based pricing.

Stephan Liozu has been a driving force in the pricing community for more than a decade. He is currently the Chief Value Officer (CVO) at the multinational engineering company Thales, where he is defining what it means to be a CVO. Stephan is also a prolific author and educator in the world of pricing and has been leading research into areas like data monetization, pricing for the Industrial Internet of Things and the ethics of pricing AIs.

Just because you have professional services and software subscriptions and data does NOT mean you are driving a service led growth model. You have service led growth when services predict subscriptions and subscriptions predict revenue. Prediction is key. To really get the crank turning, data is also monetized and the platform is constantly reducing the cost of service delivery while increasing its value.

Usage-based pricing puts new requirements on the systems we use to manage pricing and billing. LogeSense was designed for usage-based pricing and to support hybrid pricing models. We spoke with CEO Adam Howatson to understand where a leading vendor sees usage-based pricing going.

The fourth choice in the strategic choice cascades is capabilities is capabilities. In order to manage value and capture value back into pricing you need to understand the skills needed to create, communicate, deliver, document and capture (price) value and make sure these are available at each touchpoint along the customer journey. It is not enough to do this internally. Customers may need new skills to understand and participate in the value your offer.

Pricing transparency is a trending topic. Many companies are struggling with how much pricing transparency to provide and whether the transparency is around how they set prices or the actual price levels. Ibbaka reached out to three people with deep practical experience in how to answer this question. See our interview with Xiaohe Li, Stella Penso and Kyle Westra.

The third choice in the strategic choice cascade is how to win. In pricing, how to win choices are where you align your pricing and portfolio with your target market. This is product market fit, with fit including your pricing model and market including your competitive positioning. Connecting the value metric and pricing metric is an important part of this work.

Have you ever wanted to pause and take an outside-in view into your organization’s approach to pricing, positioning and value creation? At Ibbaka, we understand that assessing one’s market approach is not an easy undertaking. We want to enable both new and mature organizations to take a disciplined approach to assessing their pricing and go-to-market strategy. Which is why we have designed a The Ibbaka Self-Assessment Tool to get you started.

Product management, customer experience (CX) and value-based pricing are strong complementary skill sets. They are seldom found in one person, but when they are that person is uniquely positioned to give us insights into how these fit together. Ed Arnold is one such person. It this interview we explore the interplay of these three skillsets and how they inform critical choices in B2B growth.

The second choice in the strategic choice cascade is where to play. In pricing, where to play choices are based on a value-based market segmentation. A good segment is one where potential customers get value in the same way and buy in the same way. The segmentation helps one to target the most attractive customers.

Service led growth businesses combine data insights with a software product or platform and professional services. In some cases, hardware components are part of the total solution. But customers do not experience these as different things. The customer experience is holistic. To win with the services led growth, you have to think like your customers. Every dimension of the solution is a force multiplier for the others.