Eight steps

Developing your pricing and monetisation strategy can be overwhelming. Luckily, it can be reduced to a relatively linear process of eight key steps. Sometimes it’s necessary to circle back and refine an earlier step as you progress through the process and learn more about your customers; but in essence these eight steps will optimise your pricing outcomes. Each step maps to one of the chapters on this site, so click to dive deeper as you wish.

  1. Segment your customers based on differences in what they need and the outcomes they are looking to achieve
  2. Align on which segments to pursue and ignore, by evaluating your distance to product-market fit and go-to-market fit by segment
  3. Determine which packaging approach is most suited to your customers' needs, the nature of your proposition, and the maturity of your sales motions
  4. Allocate features and services to your packages based on your customer segmentation model; and determine which features would be better offered as add-ons
  5. Clarify and optimise your messaging and the positioning of your proposition and packages based on what resonates best with your customers and their perceptions of value
  6. Determine how to charge by identifying the most suitable price metric and which charging model(s) is most appropriate based on your objectives and customer preferences
  7. Set and differentiate price levels for your products and customers, balancing the need for simplicity with your ability to optimise for willingness to pay
  8. Agree on the rules by which price considerations will be factored into sales activity, defining processes and setting appropriate authority levels

Facts and experiments

Each of these steps should be informed by hard facts and data as far as possible, leveraging the full range of primary and secondary data sources e.g. your internal transaction and usage data, and direct research with customers and prospects.

It’s also wise to test any radically new approaches with one or more subsets of customers before allowing any rollout across your whole customer base. Netflix, for example, rigorously leverages experimentation on even the smallest changes to their customer experience, in order to market-test them before rolling them out across the base.

Make it yours

Finally, as we’ve said throughout this site, there isn’t going to be one ‘right way’ to price and monetise your proposition. There will be many possible options which will generate a profitable business, with pros and cons to each. You may need to make trade-offs and sometimes hard decisions.

It’s a process which should be driven by creativity as much as by hard facts and data. There is no doubt, however, that if you invest in these capabilities it will drive immense value for both your business and its customers.