Much of the published content in pricing is either expository or persuasive. That is to say, it is meant to either explain things to you or to persuade you of the merits of a certain approach. This is understandable. Most of the published work is from consultants and tool vendors who want to convey authority and persuade people to buy their services, adopt their platforms, or both. We also do this at Ibbaka, and if you are looking for concrete advice go down to the bottom of this post and check out our guides on developing pricing strategies and designs for enterprise software.

One would hope that the academic contingent of pricing experts would be willing to take more risks, but generally I have not found this to be the case. There is some useful work being done, but it mostly takes the form of research within well established frameworks. I am not seeing a lot of work that breaks new ground. (I have begun to read The Oxford Handbook of Pricing Management, which is a good mix of academic and consultant work, so I may change my mind on the importance of academic contributions!)

Why this conservatism in approaches? I think in part it is because we are afraid of being wrong. If you are a consultant being paid for your expertise, a software company that has invested millions of dollars into your codebase, or an academic building a reputation, taking a chance of being wrong in public is a high risk choice I have resisted it myself.

But we can only advance pricing if we risk being wrong in public. Not with our clients of course, of with the design of enterprise grade systems, but with our ideas and how we test our ideas.

So, in 2021 I will be doing more exploratory writing. Some of that will be published here and in publications on pricing and design. In parallel to this, we hope to introduce some research into the frames and processes that people with different approaches use to solve pricing problems. Pricing problems are diverse and there is no one right way to solve them. We will continue to share our work on best practices and provide tools that you can use in your own work. See our downloadable tools. In addition to this, I will be exploring six different ways of thinking about pricing that I think merit more attention. I will be doing this in a private document that you are invited to join and comment on.

So, if you want to follow this work, and add comments to the document, you can request access here.

The six themes to explore are …

1. Price as a signal for distributed decision making and as an enabler of information exchange

2. Pricing as an evolutionary system with mutations, lateral exchange, frozen accidents and niches leading to changes in pricing systems

3. Pricing as a multilayered network, or how percolation through networks can explain how pricing and pricing models are propagated through markets and how price networks and value networks can entrain each other

4. Pricing as parametric design to show how pricing models can be kept open to support extensibility and scalability

5. Pricing as complex adaptive system to understand pricing in the larger system of innovation, value and change

6. Pricing as a conversation: between product, marketing, sales and customer success; between buyer and seller; and amongst competitors and alternative

Will any of these themes be productive? I am not sure. They each seem to have enough potential to be worth exploration, and it is only through exploration that we can move the discipline of pricing forward.

The explorations will include a review of the core concepts of each frame, a mapping to pricing and applications to common pricing problems. As we are not generally able to experiment on our clients pricing we will be looking for a combination of historical pricing phenomena that need explanation and public pricing experiments where data is available or can be inferred.

There are other ways to frame pricing. If you know of compelling work in any of these areas please share. These are well established frames, but they remain areas of active research where new insights are being generated.

• Pricing and game theory

• Pricing as part of behavioral economics

• Pricing as driven by supply and demand

• Applications of machine learning to pricing and revenue management

What other frames should we be tracking?

Looking at each of these themes in isolation will be too limiting. Innovation often comes from concept blending, where ideas from different disciplines are brought together to generate new insights and frameworks. Cognitive scientist Mark Turner has explored this in a number of books, beginning with The Way We Think: Conceptual Blending And The Mind's Hidden Complexities with Gilles Fauconnier and The Origin of Ideas: Blending creativity and the Human Spark.

The basic frame for concept blending is shown below. I will be using this framing tool to combine these different frames to generate new ideas and insights. The ‘generic space’ is pricing and its related disciplines. I will use the Ibbaka process.

1. Map the customer journey

2. Understand the value drivers

3. Segment the market

4. Target a segment

5. Develop a value model

6. Design a pricing model

7. Put in place a process to evolve the model

The inputs will be two of the six frames, for example pricing as a signaling system and pricing as a conversation. A blend will combine the two disciplines in the context of pricing.

Here is some of the background reading that informs these explorations. (I like to learn through books as the length gives me an opportunity to steep myself in a set of ideas and think about them over time.)

1. Price as a signal for distributed decision making and as an enabler of information exchange
   John Holland Signals and Boundaries: Building Blocks for Complex Adaptive Systems

2. Pricing as an evolutionary system

   Richard Dawkins The Extended Phenotype
   Stuart Kauffman The Origins of Order
   Richard Solé and Santiago Elena Viruses as Complex Adaptive Systems

3. Pricing as a multilayered network
   Ginestra Bianconi Multilayer Networks: Structure and Function

4. Pricing as parametric design
   Robert Woodbury Elements of Parametric Design

5. Pricing as complex adaptive system
   John Miller and Scott Page Complex Adaptive Systems

6. Pricing as a conversation
   John Searle Speech Acts
   (Looking for more ways to understand conversations.)

Looking for tips for enterprise software pricing strategies?

See these posts

How to use indexed pricing as the economy recovers from the pandemic

How to price your learning resources

How to price integrations

When to price predictive analytics

How to use indexed pricing

How to hire a pricing consultant

Pricing professional services is a challenge for SaaS companies