6 HOW TO GET STARTED WITH CONSUMPTION-BASED PRICING Pricing is one of the most crucial business and profitability decisions you make within your revenue model. Price a solution too low and you miss out on potential revenue; price too high and you may drive business to competitors. In contrast, a well-priced solution attracts customers and enables you to gain market share. Pricing equates to two things for customers: • Value: Customers must believe that your pricing aligns with the perceived value you aim to deliver. • Alternatives: The value you deliver must be stronger than what your competitors are offering and more attractive than the status quo. There is a huge potential upside when you move to consumption-based pricing, but that doesn’t mean the shift will be straightforward. An established SaaS provider will need a certain level of fortitude to change its revenue model and the downstream financial operations. Internal processes and systems must be able to accurately track consumption to bill individual customers correctly, which may require re-examining infrastructure. And, of course, none of this is possible without access to fast, accurate data. As you prepare for the shift to a consumption-based pricing model, focus on these five areas to minimize stress and help ensure success: 1. Pick a value metric that communicates your solution’s benefits for customers. 2. Modernize your sales process and compensation structure by aligning your sales team’s comp plan to the way customers derive value from your solution. 3. Rethink your revenue playbook to account for the variable nature of consumption and the challenges associated with forecasting revenue. 4. Help customers predict and optimize spend through consumption transparency, picking the right payment structure, and managing overage scenarios. 5. Leverage data by unifying it in a central repository so you can deliver a holistic view that provides insights into consumption and your financials on a daily basis. CHAMPION GUIDES