I recently read an article about new pricing models in the digital era. A few of the key pricing models mentioned included tiered offerings, fixed fees, and subscriptions. I’m sorry to say, these pricing models are not new. However, the nuance they illustrated around metrics is worth noting because, thanks to advances in technology, new metrics have become available that allow companies to measure engagement in ways that were not possible 10 years ago, resulting in metrics that better align with customer value.

Let’s look at three examples of technology-enabled metrics that have created new opportunities:

Pay-per-view

Traditionally, customers’ options for in-home entertainment included expensive premium channel subscriptions to get the latest and greatest movies on TV. Now, you can purchase movies On Demand, selecting the titles you want, when you want, and in many cases, where you want to watch them. The ability to control the usage of content allows telecom companies to create new pay-per-use pricing options to reach new customers unwilling to pay subscription fees for content they may or may not use. In another example, Netflix has pricing options based on the number of devices used, creating a closer metric to how a person consumes entertainment compared to the traditional per-household subscription.

Demand-based

One of the most common examples of real-time, demand-based pricing is Uber and Lyft’s use of surge pricing. People are still paying for a ride from one location to another – that model has not changed from the days of hailing a cab, but the metric has. People are no longer paying based on an arbitrary number of miles or the time stuck in traffic watching the meter tick up. Instead, the metric is based on supply and demand. Lots of demand with few drivers results in higher prices per ride – a value for some, while leaving others to wait for an empty cab.

Subscription fees

An interesting example of subscription pricing is Peloton, a company now making the stationary bike really go places. Virtual spin classes eliminate the need to run to the gym for a scheduled class. This has enabled Peloton to expand its market beyond the gym and include a subscription fee for what traditionally was a product-based purchase. Virtual networks are being used in many instances to reach end users and provide more value to common products.

It is critical that pricing metrics are measurable and easy to implement. Successful metrics will also correlate price to value and capture a customer’s willingness to pay. This is where the real opportunity exists. How can you capitalize on the digital era to measure components of your value and ultimately, get paid for them?

Take a look at your organization and ask yourself:

• How do we provide value to our customers?
• What factors change the value that customers receive from doing business with us?
• Are there ways in which we can measure the change factor?
• Could this be used to capture a greater share of the value we deliver or reach a new market?

Reply below and let me know what you come up with and if there are other examples of innovative metrics you see.

Want to hear more from us on using new new metrics and big data to shape your pricing? Join us this Friday April 5 at 12 p.m. EST for our webinar.