Multiple pricing models: drawing a clear line
Maarten Laruelle I recently worked on a pricing challenge in the asset management space that illustrates a principle I come back to often: sometimes the best way to handle complexity is not to simplify one model, but to draw a clear line and create two.
The situation
The company managed a wide range of assets for their clients. Some were mission-critical, the kind of assets where downtime costs six figures per hour. Others were peripheral, important enough to track, but not central to operations.
The pricing had four distinct dimensions:
- Number of assets under management
- Complexity of the asset type (some require specialized monitoring, others do not)
- Service level (response time guarantees and reporting depth)
- Integration requirements (how deeply the system needed to connect with the client’s existing infrastructure)
Trying to capture all four dimensions in a single pricing model created a matrix that was nearly impossible for the sales team to quote confidently, and even harder for customers to understand.
The approach
Instead of forcing everything into one model, we drew a clear line between critical assets and peripheral assets. Then we built two distinct pricing models.
Model 1: Comprehensive (for critical assets)
This model used all four pricing dimensions. It was detailed, customizable, and reflected the genuine complexity of managing high-value assets. Customers in this segment expected a thorough scoping process and were willing to invest time in getting the configuration right. The price point was premium, and the sales cycle was longer.
The key insight: for critical assets, customers actually want to see that you take the complexity seriously. A simplified price would have undermined trust.
Model 2: Simplified (for peripheral assets)
This model collapsed the four dimensions into two: number of assets and a tiered service level (basic or standard). Integration was standardized, and asset complexity was averaged out. The pricing was predictable, easy to quote, and designed for faster sales cycles.
The key insight: for peripheral assets, customers want efficiency. They do not want to spend three meetings scoping out the monitoring of a non-critical asset.
Why two models work better than one
The temptation is always to find one elegant model that covers everything. But that pursuit often leads to a model that is too complex for simple cases and too rigid for complex ones.
By drawing a clear line, we achieved several things:
- Sales enablement improved. The team could quickly identify which model applied and quote with confidence.
- Customer experience improved. Each segment got a pricing experience that matched their expectations and buying behavior.
- Margin protection improved. The comprehensive model captured the full value of critical asset management, while the simplified model maintained healthy margins through standardization.
Where to draw the line
The hardest part is deciding where the line goes. In this case, the dividing criterion was clear: asset criticality. But in other businesses, it might be customer size, use case, industry, or buying frequency.
The test I use is this: if two segments have fundamentally different buying behaviors and value perceptions, they probably deserve different pricing models. Do not force them into the same box. Draw the line, build two models, and let each one do its job well.
Thinking about your pricing model? Let’s talk.