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Estd 4.22.2023
Based on the insights in our pricing strategy book, Price to Scale, monitoring customer usage is key to identifying the correct value metric. In our book, we explain that:
• The right pricing metric aligns with the customer’s perception of value. This means you need analytics that can track how different components of the product are used and correlate that usage to outcomes. For example, instead of just tracking the number of users, you might track how many of a customer’s end users interact with a specific capability—because as we noted on page 193, the value may be tied to the number of customers who receive benefits rather than just the sheer user count.
• Empirical data gathered from product analytics is essential. In one section (page 81), we discuss how analyzing market feedback and usage patterns helps refine your ideal customer profile and adjust your pricing model accordingly. Firms like Gainsight (often used in SaaS) are mentioned as examples where many companies have historically relied on user counts; however, our approach encourages looking beyond that by using detailed usage metrics to capture what truly drives customer outcomes.
• Practical application involves leveraging product analytics tools to monitor usage patterns. This could include tracking specific features or modules to see which are most correlated with real business outcomes. The key is to determine which measurements (be it transactions, active customers, or a particular event in the product) are more directly tied to the value delivered—thereby ensuring that your pricing structure aligns with customers' experiences.
In summary, our book advocates using targeted analytics to monitor customer behavior, allowing you to pivot from conventional metrics (like simple headcounts) to value-based metrics that better capture a customer's real benefit. This practice not only informs your pricing decisions but also strengthens your overall pricing strategy.