There are many different ways to come up with packaging and price: cost plus, competitive, willingness to pay, value based. Each motivates different decisions by the vendor. Over time, they will deliver different outcomes for the buyer. How a product gets priced is more important over the long term than the price.

Choosing a pricing metric is the most important pricing decision you will make. It is what frames all of your pricing decisions. The pricing metric should track the value metric so that you can frame your pricing in terms of the value you deliver. Here is a simple process to help you choose your pricing metric.

Ibbaka speaks with a lot of people about value and pricing. Sometimes, when people hear that we are pricing experts, they assume that we are out to gouge buyers. This could not be more wrong. Good pricing aligns the interests of the buyer and seller.

Value-based pricing emerged from the need to price differentiated products and services in the B2B context. Price optimization models based on simplistic economic theories proved inadequate for complex solutions with multiple stakeholders in the decision making unit. But over the past two decades, applications have expanded, first to sales and marketing, then to product management and marketing and most recently to customer success.

People come to Ibbaka with many different pricing challenges. Sometimes these are symptoms for deeper problems. How can we organize the many different types of pricing challenge and diagnose the root causes?

Sometimes we think of price as a number, the number, often ending in a 9 or 7 or 5, that we see on the pricing page. But to price effectively one needs to think of a price in the context of what is priced and how the price is presented. Price is a lot more than just the number on the price tag. It is how we frame value communicate differentiation.

Your pricing operates as a system. Change one part, a price level for example, and other parts of the system change as well. Designing pricing and them changing or evolving pricing requires a systems thinking approach.

This series is focused on the challenges of pricing a portfolio of offers. In the first two posts, we looked at how pricing changes over time and how to set goals for a portfolio of offers. Now, we move on to the most difficult part of pricing a solution portfolio. Working out how to make the interactions between different offers work in your favour. We also look at some of the pitfalls.

Good pricing design will encourage users to adopt tha behaviors that will create the most value for the user. Over the long run, that is what will build differentiation value and increase pricing power for the vendor. BJ Fogg and Nir Eyal provide models for how to do this.