Fourth, function-based pricing model
The function-based pricing model means that product pricing is based on the functions used by consumers. The more functions are used, the more the consumer pays. This pricing model is a branch of the tiered pricing model, which is specifically tiered for different functions. When consumers encounter challenges, they need different functions to solve their problems, which prompts companies to upgrade their services.
(I) Advantages
It saves consumers money. Some functions may not be needed at their current stage. They only need to pay for the functions they need at the moment.
(II) Disadvantages
It is difficult to objectively judge which functions are needed or not.
Five, user-based pricing model
The user-based pricing model means that if a company has 5 employees who need to use the product, the company needs to open an account for each of them. Each account needs to pay, so it is easier to predict revenue.
(I) Advantages
(1) Consumers understand this model better and can easily calculate the expenses they need to spend.
(2) All consumers can get full access to the product and use all functions. (II) Disadvantages
(1) Pricing based on the number of users cannot well reflect the core value of the product and is not conducive to the dissemination of the company’s brand value.
(2) It is easy to stimulate consumers’ over-sensitivity to costs, resulting in a reduction in the number of consumers who should use the product.
(3) There may be a situation where multiple people use one account, reducing the company’s deserved profits.
VI. Free Trial Pricing Model
The free trial pricing model can help companies attract a large number of consumers to register for free to use products with limited functions. After consumers successfully register, companies can carry out marketing activities to attract consumers to upgrade to paid versions to use more functions.
(I) Advantages
(1) Compared with other types, the free trial model has a lower customer acquisition cost.
(2) It is easier to obtain a large number of potential consumers and convert them into sales than direct conversion.
(3) Attracting a large number of consumers for free is helpful for testing the development of new functions.
(4) A large number of consumer groups are helpful for brand promotion.
(II) Disadvantages
(1) According to marketing industry data, the probability of converting free customers into paying customers is no more than 15%, which reduces the marketing effect.
(2) It damages the brand value to a certain extent. The “value of free” is prioritized, making it difficult for consumers to pay for the service.
(3) Serving free consumers increases the operating costs of the enterprise. This resource cost can be used to better serve paying consumers or develop products.
After clarifying the current six major pricing models, enterprises can formulate or combine a suitable pricing model based on the core value of product services, target consumer groups, functional characteristics and other factors, and then optimize and adjust after verification.