Pricing Strategy
The Nuances of Outcomes-Based Billing
Businesses are constantly searching for pricing strategies that maximize value for both customers and providers. One approach gaining traction is outcomes-based pricing, a model where customers pay based on the results achieved rather than a fixed fee or usage-based rate.
What is Outcomes-Based Pricing?
Outcomes-based pricing shifts the focus from resources used to the actual impact of a service or product. Instead of paying for a software license, for instance, a customer might pay based on reduced downtime, improved employee productivity, or cost savings achieved through that software. This approach ensures customers only pay when they see tangible benefits.
Benefits of Outcomes-Based Pricing
Aligns Incentives
Since pricing is tied to results, service providers have a vested interest in ensuring customer success. This also drastically reduces risk for customers. They do not pay upfront for uncertain value; they only pay when they achieve desired outcomes.
Differentiation
Offering performance-based pricing can be a strong competitive advantage. Since you are focused on delivering results, the relationship with your customers tends to be more collaborative and enduring.
Challenges of Outcome-Based Pricing
Defining Clear Outcomes
Determining what constitutes a successful outcome can be complex. For example, in a customer service context, is success measured by a resolved ticket, customer satisfaction, or prevented churn? The outcomes you are charging for need to be both meaningful to customers and controllable by your product.
Attribution of Success
Once a clear outcome is defined, proving that your product directly caused the desired result can be challenging. When multiple tools and human actions contribute to success, drawing clear lines of causation becomes tricky. Many customers may question whether the outcome resulted from your product or their team's efforts.
Pricing Strategy
Even with clear outcomes and attribution, determining the right price point requires careful balancing. Set it too high, and customers won't see enough margin to justify using your product. Set it too low, and you might drive high usage but struggle with profitability. The price must represent a clear fraction of the value created. This is why many companies are exploring hybrid approaches—combining a base traditional pricing model with outcome-based components. This ensures basic cost coverage while maintaining the benefits of value-based pricing alignment.
Execute on Outcomes-Based Pricing with Maple
Outcomes-based pricing is an innovative model that ensures customers pay for value rather than effort or usage. While it presents challenges in attribution and risk management, businesses that successfully implement it can create stronger partnerships, reduce customer hesitation, and set themselves apart from competitors.
Learn how Maple can help implement outcomes-based pricing with Maple.