Application Task #3

Come up with a pricing strategy for your business model. You should ultimately identify:

  • How high your price should be in absolute terms
  • What pricing mechanism you plan to use (e.g. subscription, hourly payments, pay per use, pay per license, etc.)

Below, we have listed a variety of tools that will help you come up with a useful pricing strategy. Moreover, feel free to explore the Business Model Navigator further and draw inspiration from the 55 business model archetypes Gassman has identified. 

Benefits Matrix

To determine who your competition is, use the “Benefits Matrix” which you will find among the EWOR resources. In column 1, fill in all the direct benefits of your products. Use column 2 and all following columns to dig one step deeper and find the underlying benefits to the benefits you have found in the lefter column. Continue to do so until you broke it down to the four basic drives, which are crucial to any pricing strategy according to Caldwell: avoidance of pain, pleasure, time, money. The framework lists examples for better understanding. 

Value Comparison Chart

Afterwards, use the “value comparison chart”, which you will find in the resources as well, to write down as many possible competitors as you can. You will find columns such as price, units, etc. 

The idea behind this framework is to decide on a relational framework of positioning, i.e. deciding on the competitors against whom you’ll plan to benchmark. You should create one “value comparison chart” for each specific benefit you can offer to your customers. It often makes sense to position yourself against the competitors that have the highest value unit costs as doing so promises high margins.

Baseline Cost Calculations

To set the right price, there is another useful framework which is called “Baseline Cost Calculations”. This framework helps you figure out which impact different volumes of sales have on your costs. It thus shows you the minimum price you can set. However, be aware that customers’ willingness to pay is neglected. This is why we have also linked a “Customer Questionnaire” to help you find example questions. 

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