It is easy to get lost in the many currents of discussion about the strategy and tactics of pricing -- and to lose sight of the deep connection of pricing to how enterprises think about their business, their customer relationships, and the marketing, production, and design of their products and services.
- There are many strategies for more effective pricing, such as based on value, performance, solutions, and outcomes. These relate to broader business directions, such as one-to-one, customer-first, and customer-value-first, as well as the growing focus on customer experience.
- While these generally point in the right direction, we often fail to see the forest for the trees. We need a fundamental principle to guide us, and to make it clear how to align all aspects of a business.
- My demon illuminates that driving principle.
If your pricing stays true to that, success will follow.
(Prolog to the book, FairPay: Adaptively Win–Win Customer Relationships, by Richard Reisman)
A Thought Experiment -- Imagine a Value-Pricing Demon…
- The demon knows how each buyer uses the product or service, how much they like it, what value it provides them, and how that relates to their larger objectives and willingness/ability to pay. It understands the ever-changing attributes of current context, where the value of a given item or unit of service can depend on when and how it is experienced.
- Furthermore, this demon can determine the economic value surplus of the offering -- how much value it generates beyond the cost to produce and deliver it.
- The demon can go even farther, to act as an arbiter of how the economic surplus can be shared fairly between the producer and the customer. How much of the surplus should go to the customer, as a value gain over the price paid, and how much should go the producer, as a profit over the cost of production and delivery, to sustain their ability to continue those activities.
This Prolog to my book, FairPay: Adaptively Win–Win Customer Relationships is also online. I first posted about this (with added commentary) in 2015: Harnessing the Demons of The Digital Economy.
(FairPay is an open architecture, in the public domain.)