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Multiple Pricing Models - Drawing a Clear Line

Picture of Maarten Laruelle

Executive summary: Multiple pricing models can be effective when each is clearly segmented. In a recent asset management project we evaluated four dimensions – users, features, installations and locations – to tailor our pricing strategy. We created two models: one for business-critical assets that incorporates locations, installations and tiered features, and another for less critical cases based on locations and features only. We discovered that tying pricing to users might bring extra revenue but can restrict adoption and reduce clarity. Keeping pricing simple for smaller customers while adding dimensions for larger deals avoids overwhelming buyers. Clearly defined add-ons further help sales present a straightforward proposal. Ultimately, aligning your pricing with what matters most to each customer leads to a more defensible and transparent strategy.

Should you offer different pricing models for various customer segments—location-based for micro-businesses versus user-based for mid-sized companies? Easy answer: You can offer different pricing models as long as you clearly “fence” them off. There is often not one ring to rule them all - or 1 pricelist to close all deals, at least not if you want to do decent value capturing.

The Asset Management Example

In a recent asset management pricing project, we had to decide how to price our solution. We looked at four dimensions:

  • Users: The obvious metric, but not always the best choice.

  • Features: Structured in a good/better/best (GBB) scenario.

  • Installations

  • Locations

We ended up creating two models:

  • Model A: Pricing based on locations, installations, and GBB features.

  • Model B: Pricing based on locations and GBB features only.

Why leave out users?

Tying our pricing to the users or type of users, could somehow add some extra revenue, but potentially block the usage and visibility of the solution in the organization.

Drawing the Line Between Models

The key was deciding which model suited a customer based on how business-critical their assets were:

  • Business-critical assets (Model A): For companies where assets are central to operations—even if there are few locations—the full solution with installations and detailed feature tiers made sense.
  • Non-critical assets (Model B): For businesses where assets, while useful, aren’t as central to operations, the simpler model based on locations and features was sufficient.

Obviously we also decided that few locations combined with non business-critical assets would immediate disqualify the opportunity :)

Additional Considerations

  • Add-ons: We defined add-ons (e.g., ESG reporting) that applied regardless of the chosen model.
  • Keep It Simple for Sales: The pricing model must be easy for the sales team to categorize potential customers and present a clear, understandable proposal.
  • Avoid Internal Complexity: While offering multiple options can increase commercial flexibility, exposing internal complexity can confuse customers. Make upfront decisions so that the customer sees a simple, clear offer.

Conclusion

Multiple pricing models can work if you clearly delineate them based on what matters most to your customers. The right segmentation—based on factors like business-criticality—ensures that you align your pricing with the value delivered. Remember: never let internal complexity cloud the customer’s view., but potentially block the usage and visibility of the solution in the organization.

Next to that if possible, we add as little dimensions as possible for smaller customers (it wil blurr the buying experience), but do not shy away of adding more for larger, more complex deals. Reason for that in another future post.

Let me know what you think - still trying to learn every day I am.