Today, pay-per-view isn’t the only thing you buy on a per-use basis. Companies are now offering usage-based pricing on everything from cars to car insurance, giving them rich insight into how, when, and where customers use products and threatening to upend traditional business models where revenues depend on ownership.
Align price with use
Reducing up-front barriers with usage-based pricing
Def. Shift from fixed, up-front pricing to usage-based pricing.
Alternative access models that align pricing with usage are increasingly viable for a wider range of products and services, both physical and digital. Technological advances—particularly related to ubiquitous sensors, Internet speed, and cloud computing capacity—facilitate tracking, billing, and, in some cases, delivery for much smaller and more dynamic increments of use across a variety of customer contexts. Aligning product pricing with use can unlock latent demand by reducing the up-front cost associated with physical assets for lower-use customers, expanding the market of customers who can afford to use the product. In addition, shortened product lifespans further drive demand for flexible, scalable, and lower risk options to traditional ownership.
In the report Patterns of disruption: Anticipating disruptive strategies in a world of unicorns, black swans, and exponentials, we explored, from an established incumbent’s point of view, the factors that turn a new technology or new approach into something cataclysmic to the marketplace—and to incumbents’ businesses. In doing so, we identified nine distinct patterns of disruption: recognizable configurations of marketplace conditions and new entrants’ approaches that can pose a disruptive threat to incumbents. Here, we take a deep dive into one of these nine patterns of disruption: align price with use.
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