In a crowded space where most products have similar pricing schemes, would adopting a radically different pricing model (say usage-based when all others are per-seat, or vice versa) give us a competitive edge or just confuse potential customers?

Adopting a radically different pricing model can be a double-edged sword. On one hand, it may offer a competitive edge by differentiating your product and better aligning pricing with the actual value your customers receive. On the other hand, if you change the model too drastically without taking into account what customers are accustomed to, you risk causing confusion or resistance.

As discussed in our saas pricing book, Price to Scale, a key principle is to first "identify the right value metric." This means understanding what your customers expect—for example, whether they are used to the straightforward predictability of per-seat pricing or the flexibility of usage-based models. The book explains that even if a new model may theoretically offer benefits, customers might react negatively if they find it unfamiliar or if it doesn’t clearly communicate its advantages.

Key takeaways include:

• • Recognize existing customer habits: Before switching to something like a usage-based model, assess whether your ideal customer profile is ready to embrace a different measurement of value.

• • Communicate clearly: If you decide to innovate with your pricing, ensure that the differentiation is evident not only in the model but also in your marketing and packaging strategies. Changing the naming and feature set (for example, from 'Pro' and 'Elite' to 'Premium' and 'Advanced') can help reposition the offering to make the new pricing structure seem natural and beneficial.

• • Consider segmentation: Not every customer may appreciate a pricing shift. Segmenting your customer base and offering tailored alternatives can ease the transition and minimize confusion.

In summary, while trying out a radically different pricing model can position you as an innovator, success hinges on aligning the model with customer expectations and clearly communicating how it delivers improved value. Always balance innovation with the proven benchmarks of customer comfort as highlighted in Price to Scale.