Pricing may be Fixed or Dynamic. The first is based on static variables. A List Price is as stated in the brochure etc., but may be subject to discounts depending on the number of items purchased or service required. Price may also be tailored to characteristics of the particular Customer Segment. Dynamic Pricing, by contrast, depends on market conditions, and is subject to the power and negotiating skill of the purchaser. In Yield Management the price depends on the inventory and time of purchase (as in airline seats or hotel rooms). Price in real-time markets is dynamically established by supply and demands conditions. Prices at auction result from competitive bidding.
• 90% of new businesses fail in the first 3 years because they
fail to understand their costs or what it will take to create
the goods and services they have promised in their value
• Describes the most important costs incurred while
operating under a particular business model. Creating and
delivering value, maintaining Customer Relationships, and
generating revenue all incur costs.
• What are the fundamental costs derived from my business
• Which Key Resources represent a significant expense to the
• Which Key Activities represent a significant expense to the
• How do your Key activities drive costs?
• Are the above mentioned activities matched to the Value
Propositions for your business?
• When an entrepreneur has effectively figured out their key
resources, key activities and key partnerships the
aforementioned costs become easier to calculate.
• Must evaluate the cost of creating and delivering the value
proposition, creating revenue streams and focus on long-
term customer relationships.
Cost Driven Value Driven
- Cheap price
- Reduce internal cost
- Efficiency operation
-Focus on value
- Focus on creation
- Create customer experience
Fixed Cost Variable Cost
-Exist regardless the volume
- Manufacture industries generate
high fixed cost
- Change by time
-Depend on the volume
- Sensitive to changes in demand &
- Represented by utilities & raw
• For what value is each Customer Segment truly willing to
pay? Successfully answering that question allows the firm
to generate one or more Revenue Streams from each
• Each Revenue Stream may have different pricing
• Transaction revenues:
Resulting from one-time customer payments.
• Recurring revenues:
resulting from ongoing payments to either deliver a Value
Proposition to customers or provide post-purchase
• Cost-based pricing: Set your price as a multiple of cost, or
cost plus a determined amount.
• Value-based pricing: Base your price on what your product
and service is worth to the buyer.
• Market-based pricing: Let the market determine the price.
Ownership rights are sold of a
Use of a particular service is
sold, the amount paid
depending on the usage.
continuous or repeated
access to a service is sold.
granting someone the
exclusive right to a particular
asset for a fixed period in
return for a fee
the content owners retain
copyright while selling
licenses to third parties
derives from an
performed on behalf of two or
Fees for advertising a particular product, service or brand form the basis of this Revenue
• If you have shareholders, they need to know how you are
doing and financial statements are the cleanest way to
show your progress.
• If you are looking for investors, they will want to look at
your financial statements to assess the viability of investing
in your company.