Where transactional models involve pricing by unit of output, value-based models are based on what customers see as high-value experiences and the quantified value your solution enables them to achieve.

For many companies, pricing evolves organically and is based on perception–what the vendor thinks it can extract from the buyer. But the more transactional these types of pricing models become, the less they’re able to foster strong customer relationships.

As highlighted in my previous GrowthBit, these transactional, organic models lead to higher churn than longer-term, value-based pricing models. Where transactional models involve pricing by unit of output, value-based models are based on what current or test customers see as high-value experiences and the quantified value your solution enables them to achieve.

Gartner research shows that upwards of 80% of consumers don’t believe they’re getting the full value of what they buy. At Relay Network, we believe this sentiment stems from the prominence of transactional models that do not correlate to true value, and so we transformed our model to reflect our focus on client-customer engagement.

Relay sells software to enterprise companies to improve their customer experiences. We establish and nurture relationships through meaningful, direct, and low-friction engagement on our 1-1 hyper-personalized Feed rather than driving adoption through the web and mobile portals that so many companies push as a form of customer support. Our pricing model is a direct result of that engagement strategy–one based on utilization and incorporating pay-for-performance features.

Below are a few steps you can take to incorporate an engagement strategy that reflects client needs and company values in your pricing model.

4 ways to incorporate an engagement strategy in your pricing model.

1. Identify the value exchange.

To better understand how your solutions effectively serve your customers, you’ll need to calculate how much additional revenue a prospective client can garner through the use of your services. Base this calculation on existing customer data and modeling efforts to provide a hard-number value. In-depth knowledge and experience are essentially cultivated and strengthened by the value exchange.

Automation and self-service are key to enabling good customer support. They help the customer see the value of their investment more quickly and help your business become more scalable.

2. Develop an experience library.

Before you can deliver high-touch service, you need a clear understanding of your customer and market. An experience library can help identify the high-value experiences for each of the vertical industries in which you operate–the “core” of each customer’s business. Additionally, it houses all your industry-specific customer content, which should be tailored to reflect deep insights into the customer experience.

Click here to view Relay Network’s experience library as a full-size PDF

Example of Relay Network’s experience library for the retail banking industry.

 

3. De-risk your pricing model.

Before creating your new pricing model, ask yourself how you can de-risk it for your customers. Through a clear price-to-value creation alignment, you’re able to show customers that you know their industry and can generate a predictable set of outcomes (i.e., the measurable, tangible benefits your solution will deliver) for them. This reduces buyer anxiety and speeds up the sale. The goal is to create a pricing model that’s based on your solution’s performance over multiple years and scales up as customers realize the success you’ve promised.

4. Be customer-centric, at scale.

Just as the pricing model reflects the company’s broader values, the structure of the company as a whole must reflect the pricing model, including sales and customer service. Keep in mind, automation and self-service are key to enabling good customer support. Together, they help the customer see the value of their investment more quickly and help your business become more scalable.

Here’s the bottom line.

Successful pricing models can be built upon engagement-based strategies–ones where the price point being charged corresponds with the value the customer receives. Unlike transactional models, engagement-based models are customer-centric and aligned to the customer’s revenue, cost savings and positive consumer relationship generation. Regardless of company size and growth rate, you can create customers for life by building your pricing model around customer satisfaction and engagement–by truly understanding how much your solutions’ features or experiences are worth to your customers of hard dollars.

This GrowthBit is featured in LLR’s 2022 Growth Guide, along with other exclusive insights from our portfolio company leaders and Value Creation Team. Download the eBook here.