Pricing & Profit Model

Market your solutions successfully with the appropriate pricing and payment models.

Whether “as-a-service” in pay-per-use or classically sold with financing: An innovative product requires an optimally fitting pricing and payment model in order to be accepted on the market. It is therefore necessary to examine whether a new pricing and payment model can be applied for a certain service on the market and whether this will be accepted by the target customers. This makes a smart model selection and development critical.

With the Employ Validate Adapt approach we at Homburg & Partner implement a tried and tested three-phase framework which helps you define the pricing and payment models that specifically fit your portfolio. In a constantly and rapidly changing environment we maintain an overview and do not merely identify trend developments at the surface but evaluate closely to what extent new pricing and payment models specifically fit to your company’s situation. We accordingly pursue the three phases of our EVA process as follows:

Pricing Profit Model EVA Approach

In addition to collecting all common models, an initial 3F analysis is necessary to generate a long-list of all successfully employed pricing and payment models which may be of relevance for the service in question. As part of this process we proceed step-by-step based on the following questions:

  • Family – same market, same products: What pricing and payment models are employed by the direct competition for the same products and /or service segment?
  • Friends – same market, different products: What pricing and payment models are used for comparable services in a similar industry?
  • Foreigners – different market, comparable products: What pricing and payment models are used in pioneer industries for products with similar features?

All pricing and payment models on the longlist are assessed during the validation phase using three filters so that in the end only options remain which are feasible from all perspectives, including their first evaluations regarding output potential (e.g. price increase, customer loyalty, competitive advantage) as well as input (e.g. implementation costs, risk increase). These are then assigned to a shortlist. For each filter we analyze the possible pricing and payment models considering their usability for the product from an individual perspective and answer the following questions:

  • Company: What can your company provide in terms of its own capacities and possibilities such as for example own financing models?
  • Product: Does your product have clear USPs with which the various models can be enforced while at the same time realizing full-price potential? Or, if these are less clear, is a value-added based on the pricing and payment model necessary?
  • Market: What customer requirements need to be met so that the pricing and payment model offers the customer an added value beyond the product? This can encompass for example a risk transfer, reduction of investment barriers, additional cost relief for charges on turnover or cost linearization.

The remaining options on the shortlist are then compared for the selection of the best model. This includes, in particular, modelling the input vs. output effects and the best model is then selected using a score card custom defined for your company and your services.

In the final step the pricing and payment models are developed. The accepted prices, for example, are transferred to the model and payment methods are determined. Finally, the model is tested in a pilot phase to prepare it for the market launch and to perform any fine-tuning.

Our experts for Information Technology

Homburg & Partner can look back on many years of experience in using the EVA approach to identify traditional as well as modern pricing and payment models and to test them for their suitability and their specific company context in order to implement the ideal model in close and regular collaboration with you.

Do you have questions or wish to discuss a topic? Then please contact our experts Dr. Michael Scholl and Dr. Michael Marquardt.

Managing Director & Partner

Dr. Michael Scholl

michael.scholl@homburg-partner.com
Tel.: +49 621 1582-0

Senior Manager

Dr. Michael Marquardt

michael.marquardt@homburg-partner.com
Tel.: +49 621 1582-148