Optimizing Pricing in the Real World

Pricing is an area that most CMOs would agree is sometimes black art and sometimes science. Innovations are rare: The airlines developed yield management strategies in the 1990s, where the price of a seat varied based on a number of factors including the amount of time until takeoff. Online markets such a eBay and Priceline.com offer "bid and ask" exchanges but are largely relegated to B2C businesses.

Pricing strategies generally attempt to achieve some balance of maximizing revenues, profits or market share. But it's impossible to know in advance the effect of promotions, bundles, upgrades, coupons, and plan changes -- not to mention customers' willingness to pay. And there are many factors outside of a business's control that may come into play, including macro economic trends, competitive responses, market dynamics and changing consumer preferences. While analytical models are useful in establishing an initial pricing strategy, tools for measuring the results of price tweaks, promotions and new bundles based on real world experiences have been in short supply. Until now.

Online billing and subscriber lifecycle management platforms provide the ability to measure the results of -- and therefore optimize -- pricing. Any new product bundle, service plan or price change can affect customer uptake and revenue per customer. Some such changes will be more beneficial than others. An online billing solution with appropriate reporting and analytics can measure pricing/bundle/promotion combinations against each other to determine which is most effective and should be widely deployed.

Consider this example: A new SaaS offering includes a free, standard edition as well as a paid-for premium edition. Options are also provided for additional storage. Some customers may be offered the premium plan but not the standard edition, with varying free trial periods. Other related products may be offered separately or in bundles. Competitive benchmarks are used to set initial pricing, and a number of solution bundles are offered. In addition, certain plans have associated upgrades that may be offered to achieve maximum revenue from a customer. With this many variables, how can a business choose the optimal pricing strategy?

A comprehensive billing and subscription management solution such as that offered by Aria Systems provides a means to optimize pricing based on actual subscriber behaviors and preferences. Each pricing, bundling and upgrade plan can be compared to others in terms of adoption rates and average revenue per user (ARPU). Those plans that result in the least revenue or adoption rate can be discontinued, while those that work the best in light of the company strategy can be more aggressively promoted. Over time, as market dynamics change, these plans can be tweaked on an ongoing basis to enable the highest possible revenue from the solutions being offered.

Support for a variety of plans is an architectural capability of advanced billing systems, and only Aria Systems' solution is based on such an architecture. With Aria, it's as if a business can operate with a pricing dashboard, rather than flying blind. And the same multi-plan architecture that enables pricing optimization also provides channel support -- an essential component of any subscriber management system in the  subscription economy ecosphere. Aria Systems is unique among online billing providers in enabling real-world pricing optimization as well as comprehensive channel support.

Aria Systems, the leading provider of on-demand billing solutions, offers the only monetization platform encompassing the full spectrum of Billing and Subscription Management services.