Pricing Process Part 3: Structure (3b: Price Models)

Abstract

AbstractOne of the many motivations of this book is the presentation of the interplay between business model, revenue model, and pricing process. The starting point for price management is the business model (see Chap. 3). It is about a clear understanding of one’s own added values and the underlying value creation processes. This results in potential revenue sources and revenue partners (see Chap. 4). Suitable price models are derived on the basis of the revenue model. Price models (“how to charge?”) define the qualitative basis on which quantitative price levels (“how much to charge?”) area based. Price models are systems with multiple interacting parts. The object of price modeling is to answer the questions of what for, when, by whom, and on the basis of which parameters the price is defined. Digitization offers enormous opportunities for differentiation in pricing. Not via the price amount as such (“numerator” of the pricing formula). But via the price model (the “denominator” of the price). Numerous success stories prove that innovative price models have a very strong impact on perceived customer benefits. With value-based reference bases, the customer’s attention is shifted to the performance or the financial result. Innovative price models not only lead to a better monetization of benefits but are a value driver in their own right for the customer: They increase the value to customer (and thus enhance the business model)! The consequence of this is that price management is not just “value capturing” (monetization). Pricing can also contribute to value generation.