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Pricing and Bundling: Finding the Golden Pair
Classic pricing strategies generally take two forms: cost-plus where a mark-up is applied to the cost of providing the product or service or value-based where an estimate of the customer’s perceived value of the product or service is added to the cost. Both start with the cost of the product or service, and focus first on recovering all costs and then
MPD teams helps catalysts to think and act differently. In their business environments, we help to move catalysts away from cost plus and even value based pricing strategies that are not only ineffective, but can be lethal. We work with them to design multi-sided pricing strategies that attract each distinct customer group to the other. Sometimes this means helping them to decide which side should be given a discount in order to attract the other. Other times, it means offering one side the product at less than cost.
Since the objective of a catalyst business strategy is to get both sides on board around a common platform, pricing structures must be designed so that profits for all sides are maximized. That means that price points (e.g. $19.99 versus $25.00) are no more important than pricing structures (e.g. who pays how much and why).
MPD's Core Expertise:
- Catalyst pricing strategies and structure
- Multi-sided pricing models
- Bundling strategies
- Penetration and entry pricing strategies
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What is POA and how can it help companies monetize their IP?
One important aspect of getting products to market is balancing the wants of the buyer with the costs of choice.
Product Offering Architecture (POA) is based on extensive field research on product offerings, business models, and pricing
in diverse industries and draws on theoretical work on bundling, versioning, and other aspects of product architecture.
It is based in part on very recent empirical and theoretical research that has been published by MPD's David Evans in the Yale Journal of Regulation.
POA also is the topic of a new report from MPD, forthcoming this Spring in MIT's Sloan Management Review.
Preview it or contact us for a copy of the full report.
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