Why does Pricing Models matter?
The structure decides whether revenue grows as a customer gets more value from you, and that compounding matters more over time than the initial price does. Per-seat grows with headcount, which may have nothing to do with the value delivered. Usage-based grows with value but makes revenue harder to forecast and bills unpredictable. Tiers are simple to buy but leave money on the table at the top and exclude buyers at the bottom.
What does Pricing Models look like in practice?
For a dental practice, per-seat pricing is awkward. A practice has few staff but many patients, so seats do not track value. Per-location or per-appointment-volume tracks what the product actually delivers. The useful question is: as this customer succeeds, does our revenue from them rise? If not, the structure is working against you no matter how the price is set.
What are the common mistakes with Pricing Models?
- Copying a competitor's structure without checking that value scales the same way.
- Choosing usage-based without considering that unpredictable bills are themselves a reason to churn.
- Building so many tiers that buyers cannot tell which one they need.
- Treating structure as permanent. It is changeable early and very expensive to change later.
Related concepts
- Value-Based PricingSetting price from the value the customer receives rather than from what the product costs you to build and run.
- Willingness to PayWhat a customer would actually hand over money for, as distinct from what they say a fair price would be.
- Unit EconomicsWhat it costs to acquire and serve one customer versus what that customer is worth. The question of whether the business works at the level of a single customer.