Revenue leakage
Last updated
Last updated
Working with various Usage Based Pricing models you can end up in situations where you unintentionally loose potential revenue due to flaws or inefficiencies in a price model. The more common it is that you accept custom pricing, the easier it is that you end up with a price model that seemed brilliant during the negotiations with the customer, but ended up in revenue leakage for certain usage patterns.
Plock addresses this with the Price plan visualiser. A real time graphical preview of your price plan for all volume tiers. You will immediately identify flaws in the price model that leads to leakage by unintentional revenue drops.
Study the price model below, in the negotiation it made sense since the customer's flat fee increases for each volume Tier. From 500 EUR, to 600 EUR, to 700 EUR. On top of these flat tier fees, the customer is also charged a per unit fee in a falling scale to incentivise growth. But the model has inefficiencies and the revenue doesn't scale. Which is immediately visualised in the Price plan preview.
The visualiser tells you to increase the flat fee for the second tier to 800 EUR. By doing so, we have eliminated the revenue leakage in Tier 2.
However, we still have a flaw in the last Tier, that leads to a substantial revenue drop when the customer exceeds 200 Units. The flat fee for the last Tier needs ot be increased to 1,000 EUR. By doing that change, the Price plan visualiser immediately tells you the leakage is now eliminated. We now have an efficient price plan that incentives the customer to grow whilst protecting your NRR.
