Article Bank

Do You Need a New Pricing Metric?

(413 words – 4 min)

The first indication that you need a new pricing metric is you have customers who get massive amounts of value but don’t pay you very much.  

A pricing metric is what you charge for.  It’s usually what goes on your invoice.  Companies that sell physical goods typically charge by the item.  Software and service companies have many options.  You can charge by the click, download, storage, hour, month, project, and many, many more.  The goal is to find a pricing metric where the customers pay more as they receive more value. 

When a customer receives way more value than they pay for, you likely have a pricing metric problem.  You are charging for the wrong factor.  

One company sold a software tool to law firms and charged by the user.  That metric worked well for smaller law firms because each lawyer who used the tool had a license.  However, they identified some larger law firms that used the tool more but paid lower prices than many smaller firms.  After looking into the reason, they found that larger firms hired a few assistants whose job was to use the tool for every lawyer.  Since only the assistants needed a license, they bought fewer licenses than smaller firms.  Hence, pricing by the user didn’t capture the value they delivered to large law firms.

The solution, of course, is to stop charging by the user and instead charge by something else, probably something related to usage of the tool.  

Here is my recommendation.  If you monitor the usage of your product (and you should if you are a cloud-based SaaS provider), take the overall price a customer pays and divide it by their usage.  You now have a price per use.  Do you see a huge range?  Is there a point where the price per use jumps?  If yes, investigate to see what is happening.  It may be time to rethink your pricing metric.  

If you can’t monitor usage, estimate how much value each customer receives.  Compare that to how much they pay.  If some customers receive much more value than they pay for, you may have the wrong pricing metric.

Buyers trade money for value.  But when they get way more value than they pay for, you are doing something wrong.  It’s likely an easy place to grow your revenue, margin, and profit.  

What indicator do you use to revisit your pricing metric? 

article Bank usage guidelines

Permission to reprint articles by Mark Stiving, Ph.D., is hereby given to all print, broadcast, and electronic media provided that the contact information at the end of each article is included in your publication.

For organizations publishing articles electronically, a live, clickable link to must also be included with the body of the article.  Additionally, please mail one copy of your publication to:

Mark Stiving, Impact Pricing
6410 Peavine Hills Ave. Reno, NV 89523
  1. Permission to reprint articles by Mark Stiving, Ph.D. at no charge is granted with the agreement that:
    • a. The article bio is included following each article used.
    • b. One copy of the publication in which the article is published be provided Mark Stiving.
    • c. A $300 fee per article will be expected for articles published without the closing bio and contact information.
  2. Permission is also granted for reasonable:
    • Editing content and industry-specific example exchange.
    • Length.
    • Article title change.
  3. Electronic publishing of articles must include a live, clickable link to

Any questions, please email to [email protected] or call (408) 307-6800

Thank you.


Pricing Best Practices:
How Private Equity Can Drive Value Without Compromising Relationships

Don't miss out on this opportunity to enhance your pricing approach and drive increased value.

Our Speakers

Mark Stiving, Ph.D.

CEO at Impact Pricing

Alexis Underwood

Managing Director at Wynnchurch Capital, L.P.

Stephen Plume

Managing Director of
The Entrepreneurs' Fund