Benefit-driven Pricing Model for the Changing Context of Technology Consumption

by : Ahmed Abdullah-Al-Tamjeed

In an ever-increasing digital world, business users and consumers alike are now more connected to technology than enterprises are. Consumers adapt the technology they desire and tools that add value to them, whereas business users are also empowered through their own devices and use the tools they choose in addition to those delivered by the IT dept. Communications, both from a leisure and work standpoint is now done through freely available apps like Whatsapp, Viber etc. Just to show the popularity of usage of these apps – as high as 77% of mobile users use Whatsapp in a Malaysia. This is according to a recent Globalwebindex survey1 and the global average is 39%. Therefore, this is not an isolated case, rather a global phenomenon that is shaping the way people are communicating. Even as we speak, customer engagements are happening over social media directly. Facebook is now a household name, with five countries within the Asia Pacific region rating it within the top 2 most used apps2.

What this means is that, consumers now have the upper hand over organizational IT when it comes to choosing which tech solutions they should use. The brand-centric approach of yesterday is quickly being replaced by a consumer-driven market, where customers are dictating the style, quality and medium that organizations must use to reach them and win their business and loyalty. In short, consumers and business users are the kings – the ones dictating which tech product(s) will live or die in the market.

Again, these kings opt to pay only for the benefits they get! They’d rather pay for the songs they actually listen, rather paying a full month subscription fee for unlimited downloads. Rather than taking the full suite of an Operations Support System (OSS), a company struggling to manage its customer info may only look for the CRM module. Again, this company now wants to pay the vendor for the number of customers they actually use it for. A simpler example can be – supply of printer at my office by a managed service partner – I pay them for the number of pages I print. This is what is called benefit-driven pricing model and what the technology consumption is heading towards.

If you’re not taking note of this shift, you’re probably running the risk of commoditizing your products and services. What this ultimately means is that your customers (both present and future) will not be able to differentiate your products and services and whether or not they generate any better/higher value than those offered by your competitors. It is therefore imperative to focus and innovate not just on what your products can offer, but how you can get your customers to fully understand and utilize them, thereby increasing consumption value. This is the key in the benefit-driven pricing world, where paying for exactly the amount of benefit derived and use repeatedly is the name of the game. Tech companies need to love this micro-but-multi transactions pattern of the model and raise business volume to fully realize the boon of the benefit-driven pricing model. While price of the products and consumption will be determined by the market, strategies (from organizations) should be around increasing volume – consumer consumption.

Organizations need to deploy certain strategies if they are to thrive in a benefit-driven pricing market. They need to adjust to the increasingly intelligent demands of not only just their existing customers, but future ones as well. Understanding the reasons for diminishing business returns that cause lowered performance (and loss in ROI) is the first step in making the much needed change into the benefit-driven pricing dominated industry. Organizations that will be able to leverage this shift in consumer behaviour will ultimately have an upper hand against its competitors.

1 http://www.globalwebindex.net/blog/whatsapp-latam-mena
2 http://www.ericsson.com/res/docs/2015/ericsson-mobility-report-june-2015-raso-appendices.pdf

Mr. Tamjeed is a Portfolio Manager at ssd-tech Ltd. He can be reached at tamjeed@ssd-tech.com 

 

 

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