Everybody has a pricing metric. But so few companies actually think about it. Think about when we bought cars, we would buy a car. And that’s a pricing metric. The pricing metric is what is it that you charge for as a company.
So McDonald’s charges for hamburgers, so a hamburger is a pricing metric. In the old days of software, I remember going to Fry’s Electronics and pulling a shrink-wrapped box off the shelf with Microsoft Office in it.
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“All companies use pricing metrics. Some companies consciously make the decision.”
– Mark Stiving
And so the pricing metric was that box, they were selling me the box and the contents inside it. Nowadays, though, especially in the world of SaaS, and cloud-based SaaS, we have tons and tons of different things that we could possibly choose for, choose to charge for, for example, maybe we charged by the user, which is what Salesforce certainly popularized in the subscription business.
We could sell by the gigabyte of storage, we could sell by the number of clicks, we could sell by the number of downloads, we could sell by the number of emails, there are so many different things that we could sell our products based on.
And what I find fascinating is when we moved to cloud-based SaaS, many of these companies had to think through this, they had to say, Okay, what makes sense for us, although way too many of them still just default to users when it’s probably not the best choice.
But now, go back to a traditional company. Now that we understand that we get to choose what we want to charge for, is there a way that we could choose something that more closely ties to the value our customers receive?
And one of my favorite examples of that was a comedy theater in Spain, where they had video cameras on the seat in front of you, and they charged based on the number of laughs.
That’s pretty awesome.
The real point is, spend a few minutes, think about your pricing metric back maybe spend a few hours, but your pricing metric in a traditional business, you have the ability, the potential to change industries.
Just look at what Netflix did to Blockbuster.
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