Tool #42

In the early days of my career, I was working at ABB with their electric meters. I was given a project to evolve the pricing structure for these meters throughout Europe. I was young and naive at the time, I thought let us make it simple and standardize the price in all markets, it would certainly make billing simpler. When I presented this idea, I was ridiculed, I was told to go back and reformulate my proposal. The error in my thinking was I assumed we are pricing the product nothing more. But in reality, we are actually pricing the behaviors of the consumers of our product. I went back and saw the different dynamics, the different behaviors, across the different markets. One country took a functional approach, they stored the electric meters until needed. Another country functioned as a regional supplier, their focus was in logistics and supplying the meters to other regions. Yes, it was the same product, but the behaviors made it into different products. I finally recognized price had a logic behind it.

At another point in my career I was tasked with something similar, to build a pricing proposal. This time I knew about the complexities of pricing so I built a software tool to capture all the different dynamics and develop the optimal pricing solutions. There was a problem though, a big one. This solution was too complex. It would require a whole new billing architecture. This time I learned it is not about just pricing the different values from the different behaviors. It was also about the pricing structures, the billing management systems.

In my dot-com career, I built an email marketing software platform. At the time no one thought you could price emails. But it was not the emails that were being priced, it was how they would be used. I also knew the pricing logic could not be too complex. But the challenge here was the communication. I had to develop communication to support the pricing structure.

This is why pricing needs to be a part of the product and a part of product management. There are many ways to work with pricing, and this is captured well with the pyramid scheme I learned through ISPMA. Pricing Pyramid has helped me to develop pricing logic that works.
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