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Estd 4.22.2023
Based on the ideas in our book Price to Scale, the recommended approach is to use a usage-based or modular pricing model when your product’s value clearly scales with geographic reach or the number of locations served. Here’s how you can think about it:
• Identify Your Metric of Value – Before setting a price, determine whether geographic reach or number of locations is a true proxy for the value your product delivers. Our book emphasizes the importance of choosing metrics that directly correlate with the benefits the customer experiences.
• Usage-Based Pricing – If each location represents additional usage (and cost) on your end, consider charging a base fee plus an incremental per-location fee. This creates a direct link between the customer’s reach and the value they derive from your service.
• Modular or Tiered Structures – For customers with many geographic points, you might consider bundling locations into tiers. For example, a “Good-Better-Best” packaging (discussed in Price to Scale, Chapter 3) allows you to offer bundled capabilities for different geographic scales and market segments while still recognizing the added value of each extra location.
• Volume Discounts – When the number of locations rises, customers often expect some discounting. As noted in our book, setting discount ranges based on customer segments (e.g., commercial versus enterprise) is common practice. Large enterprises with a broad geographic footprint might deserve a model that respects the economies of scale without underpricing the true value delivered.
In summary, align your pricing with how your product’s value and costs scale with geographic reach or location count. Whether that means a per-location fee or modular tiering, make sure your metric is transparent, measurable, and closely aligned with the benefits your customers receive. This approach not only supports client adoption but also ensures that your pricing strategy scales efficiently with your customer’s success.