Pricing Model Canvas: A guide to strategic pricing
The Business Model Canvas has established itself as an essential tool for the development and visualisation of business models. It is the strategic framework that makes it easier for you as a manager to align your business activities and visions. However, while the design of business models often takes centre stage, one critical aspect of business success and profitability is often overlooked: pricing.
9 levers of the Pricing Canvas help you to set up your company profitably
With the Pricing Model Canvas from Prof. Roll & Pastuch, you can systematically identify profit levers and future-proof your company.
Pricing is often approached intuitively or based on past experience rather than through strategic planning. It is often seen as a downstream step that does not receive the same attention and methodical analysis as other parts of the business plan. Yet the right pricing strategy can determine the success or failure of a product or service. It has a direct impact on sales, market share and ultimately profitability.
This is where Prof. Roll & Pastuch's Pricing Model Canvas comes in. It is designed to give you a comprehensive overview of your pricing and to view it as an integral part of your business strategy. This innovative tool is not only an answer to the complexity of pricing management, but also the basic framework for making informed, data-driven pricing decisions without getting bogged down in the details.
The Pricing Model Canvas is a crucial tool, especially for companies that are at the beginning of their pricing journey. It makes it possible to systematically identify profit levers that will significantly strengthen your company's growth and market positioning. In the rest of this article, you will learn how you can use each element of this canvas to make your prices not only competitive but also profitable.
Pricing is often approached intuitively or based on past experience rather than through strategic planning. It is often seen as a downstream step that does not receive the same attention and methodical analysis as other parts of the business plan. Yet the right pricing strategy can determine the success or failure of a product or service. It has a direct impact on sales, market share and ultimately profitability.
This is where Prof. Roll & Pastuch's Pricing Model Canvas comes in. It is designed to give you a comprehensive overview of your pricing and to view it as an integral part of your business strategy. This innovative tool is not only an answer to the complexity of pricing management, but also the basic framework for making informed, data-driven pricing decisions without getting bogged down in the details.
The Pricing Model Canvas is a crucial tool, especially for companies that are at the beginning of their pricing journey. It makes it possible to systematically identify profit levers that will significantly strengthen your company's growth and market positioning. In the rest of this article, you will learn how you can use each element of this canvas to make your prices not only competitive but also profitable.
1. Pricing strategy
A coherent pricing strategy forms the backbone of successful corporate management. It is not only an essential component of the overarching corporate strategy, but also significantly reinforces and supports it. Various approaches, such as competition-oriented pricing, differentiated markup pricing and value pricing, offer different ways of aligning pricing with your specific corporate goals. Whether it is increasing sales, maximising profit or expanding market share, how can you design your pricing strategy to not only meet but exceed your business objectives depending on the maturity of the products or the position in the product lifecycle?
2. Next best alternative (NBA)
To compete effectively, it is crucial to understand what alternatives customers will consider before choosing your product. Identifying the Next Best Alternative (NBA) provides insight into who you are actually competing against. The key question here is: What unique added value does your product offer compared to the NBA? For effective pricing, it is crucial not only to recognize this added value, but also to quantify it. This is the only way to ensure that your pricing reflects the unique benefits of your product and convinces your target group.
3. Target customers
Successful pricing starts with in-depth customer segmentation and assessing the potential of each segment. This process allows you to accurately identify target customer segments and determine their specific willingness to pay. Careful price differentiation allows you to offer tailored pricing options that both meet customer needs and advance your business objectives. How can you set your prices so that they accurately reflect the willingness to pay of each customer segment, while at the same time supporting your strategic goals, be it market share or profitability?
4. Product Value
Determining the value of the product is essential to setting an appropriate price point. The focus is on the perceived value of the product from the customer's perspective. Through a combination of direct and indirect pricing research, such as van Westendorp, Conjoint and Garbor Granger analysis, together with internal assessments and data analysis, the benefits created by the product are translated into a monetary value which is then used to set the price. How do you determine the value of a product to your customers and what is the best way to do it?
5. Conditions and discounts
Especially in the beginning, many companies tend to offer attractive discounts in order to gain market share quickly. However, there is a risk that once prices are established, they may be difficult to adjust upwards. A well-designed, performance-based rebate system can help by offering individual incentives and discounts on top of the list price. The key is to ensure that any price reduction is based on clear customer value and transparent rules. Typical conditions include volume rebates, marketing support or process improvements.
6. Innovative pricing models
Innovative pricing models are becoming increasingly important, especially those that generate recurring revenue streams. Companies are being challenged to rethink traditional sales models and consider moving to 'Everything-as-a-Service' (XaaS) models, which allow companies to move from traditional capital expenditure (CAPEX) to usage-based operational expenditure (OPEX). This shift to OPEX gives customers the flexibility to recognize expenditure as an ongoing operational cost rather than a large upfront investment.
This requires the careful selection of pricing metrics that benefit both the customer and the organisation by providing clear and understandable value. Subscription models in the software industry and pay-per-output approaches in the engineering industry are examples of this evolution. The challenge is to find an appropriate pricing model that best reflects the value of the product to the customer and the customer's preferred procurement process.
7. Value selling
Value selling changes the way products and services are presented and sold. Instead of focusing on features, the focus is on the real value that the product or service brings to the customer. This approach is particularly important for innovative pricing models and product bundles that combine hardware, software and services. It requires a shift from traditional sales conversations to solution selling, where sales communicates the value of the product throughout its lifecycle. To make this shift, salespeople need to be specifically trained to emphasise product benefits rather than just features, and to effectively communicate the total value of the offering to customers. This involves developing specific skills such as the ability to analyse needs, create customised solutions and persuasively argue how the product or service addresses the customer's specific challenges or goals.
8. organisation & processes
Robust price management requires a clearly defined organisational structure. It is crucial to integrate a dedicated pricing department into the organisation. The department is responsible for maintaining an overview of the issues discussed here, responding to market dynamics in an agile manner, and executing processes smoothly through defined interfaces within the company. Data analysis skills and cross-departmental collaboration are essential to building sustainable pricing expertise. Integrate data analysis experts into the pricing department to enable data-driven pricing decisions. Involve experts from marketing, sales and product management to ensure full strategy alignment. Clear lines of responsibility must also be established and ongoing pricing training provided.
9. KPIs and governance
A solid governance structure is essential for the long-term success of price management. It should clearly define responsibilities and systematically document processes. Ongoing monitoring through advanced Business Intelligence (BI) reports ensures that pricing remains dynamic and continuously adapts to market changes and customer needs. It is essential to define and regularly monitor key performance indicators (KPIs). Important KPIs such as discount implementation, markup rates and price elasticity should be continuously evaluated to measure and adjust the effectiveness of the pricing strategy. A robust set of rules should also be established to clearly define pricing policies, approval processes and responsibilities within the organisation. These measures will help to ensure that price management is not just reactive, but proactive and strategic.
A coherent pricing strategy forms the backbone of successful corporate management. It is not only an essential component of the overarching corporate strategy, but also significantly reinforces and supports it. Various approaches, such as competition-oriented pricing, differentiated markup pricing and value pricing, offer different ways of aligning pricing with your specific corporate goals. Whether it is increasing sales, maximising profit or expanding market share, how can you design your pricing strategy to not only meet but exceed your business objectives depending on the maturity of the products or the position in the product lifecycle?
2. Next best alternative (NBA)
To compete effectively, it is crucial to understand what alternatives customers will consider before choosing your product. Identifying the Next Best Alternative (NBA) provides insight into who you are actually competing against. The key question here is: What unique added value does your product offer compared to the NBA? For effective pricing, it is crucial not only to recognize this added value, but also to quantify it. This is the only way to ensure that your pricing reflects the unique benefits of your product and convinces your target group.
3. Target customers
Successful pricing starts with in-depth customer segmentation and assessing the potential of each segment. This process allows you to accurately identify target customer segments and determine their specific willingness to pay. Careful price differentiation allows you to offer tailored pricing options that both meet customer needs and advance your business objectives. How can you set your prices so that they accurately reflect the willingness to pay of each customer segment, while at the same time supporting your strategic goals, be it market share or profitability?
4. Product Value
Determining the value of the product is essential to setting an appropriate price point. The focus is on the perceived value of the product from the customer's perspective. Through a combination of direct and indirect pricing research, such as van Westendorp, Conjoint and Garbor Granger analysis, together with internal assessments and data analysis, the benefits created by the product are translated into a monetary value which is then used to set the price. How do you determine the value of a product to your customers and what is the best way to do it?
5. Conditions and discounts
Especially in the beginning, many companies tend to offer attractive discounts in order to gain market share quickly. However, there is a risk that once prices are established, they may be difficult to adjust upwards. A well-designed, performance-based rebate system can help by offering individual incentives and discounts on top of the list price. The key is to ensure that any price reduction is based on clear customer value and transparent rules. Typical conditions include volume rebates, marketing support or process improvements.
6. Innovative pricing models
Innovative pricing models are becoming increasingly important, especially those that generate recurring revenue streams. Companies are being challenged to rethink traditional sales models and consider moving to 'Everything-as-a-Service' (XaaS) models, which allow companies to move from traditional capital expenditure (CAPEX) to usage-based operational expenditure (OPEX). This shift to OPEX gives customers the flexibility to recognize expenditure as an ongoing operational cost rather than a large upfront investment.
This requires the careful selection of pricing metrics that benefit both the customer and the organisation by providing clear and understandable value. Subscription models in the software industry and pay-per-output approaches in the engineering industry are examples of this evolution. The challenge is to find an appropriate pricing model that best reflects the value of the product to the customer and the customer's preferred procurement process.
7. Value selling
Value selling changes the way products and services are presented and sold. Instead of focusing on features, the focus is on the real value that the product or service brings to the customer. This approach is particularly important for innovative pricing models and product bundles that combine hardware, software and services. It requires a shift from traditional sales conversations to solution selling, where sales communicates the value of the product throughout its lifecycle. To make this shift, salespeople need to be specifically trained to emphasise product benefits rather than just features, and to effectively communicate the total value of the offering to customers. This involves developing specific skills such as the ability to analyse needs, create customised solutions and persuasively argue how the product or service addresses the customer's specific challenges or goals.
8. organisation & processes
Robust price management requires a clearly defined organisational structure. It is crucial to integrate a dedicated pricing department into the organisation. The department is responsible for maintaining an overview of the issues discussed here, responding to market dynamics in an agile manner, and executing processes smoothly through defined interfaces within the company. Data analysis skills and cross-departmental collaboration are essential to building sustainable pricing expertise. Integrate data analysis experts into the pricing department to enable data-driven pricing decisions. Involve experts from marketing, sales and product management to ensure full strategy alignment. Clear lines of responsibility must also be established and ongoing pricing training provided.
9. KPIs and governance
A solid governance structure is essential for the long-term success of price management. It should clearly define responsibilities and systematically document processes. Ongoing monitoring through advanced Business Intelligence (BI) reports ensures that pricing remains dynamic and continuously adapts to market changes and customer needs. It is essential to define and regularly monitor key performance indicators (KPIs). Important KPIs such as discount implementation, markup rates and price elasticity should be continuously evaluated to measure and adjust the effectiveness of the pricing strategy. A robust set of rules should also be established to clearly define pricing policies, approval processes and responsibilities within the organisation. These measures will help to ensure that price management is not just reactive, but proactive and strategic.
Final words
The Pricing Model Canvas provides you with a structured method to not only optimise your pricing, but also to effectively support your business strategy. Use this guide to refine your pricing practices and ensure that you turn your pricing into a real competitive advantage. Start now and set the course for a profitable future.
Author: Prof. Dr. Oliver Roll is Managing Partner at Prof Roll & Pastuch. He is one of the leading pricing experts in the DACH region and has managed pricing projects for numerous international companies. Prof. Roll holds the chair of "Price Management" at Osnabrück University of Applied Sciences.
Keywords: Project management, Pricing Model Canvas