Pricing is one of the biggest bugaboos in the marketer’s list of responsibilities. Not only is it critically important to your business – after all, it impacts your profitability, competitive positioning, and is central to your success in the market – but also it’s hard to do. It’s a complex challenge, you usually have to do it with incomplete information, and if you’re like most marketers, you probably don’t have a PhD in economics to fall back on (I know I certainly don’t).

So what’s a marketer to do? I’ve given a lot of thought to best practices in pricing over the years, and I’ve developed a concept I refer to as “Utility Pricing”. Simply put, Utility Pricing consists of understanding the economic value your product or service provides to your customer and how that value scales (i.e. how it grows as the size of your sale grows), and pricing your product to take a “reasonable” percentage of that value. That way your customer can build a very clear ROI value proposition for using your offering, and at the same time, you can scale your revenue to extract the maximum reasonable value out of each customer engagement, be it large or small.

Of course, you must take factors such as business case objectives (what market opportunities and business goals do you have) and competitive positioning (are you a premium-positioned offering or a low-price leader) into account as well. You must also consider things like discounting, auditing and measurement, and the inevitable downward pressure of pricing in today’s competitive marketplace.

I have put together a slide presentation describing some of these thoughts, complete with visual and numerical examples, and listing out objectives, pricing frameworks, and key success factors to apply Utility Pricing. It introduces a handy acronym, “BEST”, to ensure you have captured the key elements of the methodology. Like everything else in my Document Library, it’s available for download without cost or obligation, as a service to those in my professional network. Please feel free to peruse it, and all I ask in return is you think of me next time you need to price (or position, communicate, or otherwise enable) your products or services in the marketplace.