Effective pricing of services is a big challenge, because the value of the service is immaterial, subject to subjective assessment of customers and it is difficult to determine its real cost of production.
The positive aspect is that services are often difficult to compare, which gives greater flexibility and freedom to set prices.
Pricing is crucial in the three areas of a service company’s monetisation strategy:
- Customer acquisition
- Customer retention and
- Up-selling and Cross-selling of the offers
Pricing services begins with identifying what benefits the service offers customers and how different customer segments are differentiated by perceptions of value and willingness to pay.
If the degree of differentiation is high, the value offer and price offer should be targeted at particular customer segments. In the next step, we determine the estimated cost of acquiring a new customer CAC (Customer Acquisition Cost) and the conversion rate.
Ultimately, the effectiveness of our pricing can be measured by comparing the customer’s revenues in the forecast period of using the service with the cost of obtaining it (Life Time Value / Customer Acquisition Cost.
The competitive advantage of the service provider may be brought about by the application of new, increasingly common price models, i.e. Freemium, Pay As You Go, Performance Based Pricing.
In the pricing of services, particular attention should be paid to the fact that the price strongly signals the perceived service quality.
We support service providers through:
- Setting the price list architecture
- Designing effective monetisation models