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The Long and Short of Pricing Strategy | tech – growth – venture

Creating Margin with Consumption-based Pricing

Consumption pricing is charging based on how much or often a consumer uses the product.  The two most obvious examples would be almost any cloud storage provider or Invision’s per workflow product.

This structure is perfect if your product could be accessed by an entire group or division with one login and not lose effectiveness.  In the example above, if pricing was consumer based (per seat) a design team could easily create one log-in to create as many prototypes as needed.

If Invision used a per-seat structure, it’s unlikely they could start pricing at $25/mo.  Instead, it would likely be in the neighborhood of $10/mo.  This structure likely allowed them to charge $15 more per month AND make it feel like a value to the end user.

Pricing often gets overlooked in the foundational aspects of company building.  Yet, when structured correctly, pricing strategy can create incentives that become powerful catalysts for early adoption and create extra margin over the long-term.

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The Long and Short of Pricing Strategy – tech | growth | venture.