In today’s rapidly evolving technology landscape, technology leaders face the challenge of effectively pricing asset-based services to reflect customer value. As traditional pricing models fall short in capturing the true value of these services, technology leaders must adopt innovative strategies to fully monetize their assets and intellectual property.
Understanding the shift to asset-based services
The demand for asset-based services is on the rise. Buyers prioritize these services for their ability to deliver faster value and greater insights, accelerating competitive advantage and operational change.
Traditional pricing models, which focus on people-based services and vendor margins, fail to capture the customer value inherent in asset-based services. These services require different revenue timing, cost structures, and stakeholder alignment, necessitating a shift in pricing strategies.
The technology industry is witnessing a blurring of traditional boundaries, with service providers, software companies, and cloud infrastructure providers expanding their offerings. This shift presents new growth opportunities, driven by competitive dynamics that redefine organizational roles.
Buyers are increasingly attentive to the effective use of prebuilt assets, tools, and platforms, as these elements are crucial for achieving faster value and higher quality insights. Technology leaders must align with buyers’ desired outcomes and business goals to deliver on these expectations.
Leveraging multiple pricing models
Traditional service-pricing models, such as time-and-materials or fixed-price contracts, do not adequately reflect the value of asset-based services. These models often fail to connect with the “time-to-value” or desired business outcomes that clients seek.
To overcome these limitations, tech services leaders must understand the commercial value of their services and set prices that reflect the impact of their assets. This requires a multidimensional pricing approach that accommodates the diverse nature of assets and their potential to deliver quantifiable commercial outcomes.
Gartner has found that service providers using multiple pricing models report higher gross profits, lower customer acquisition costs, and greater customer lifetime value. These providers also generate more new revenue from existing accounts, highlighting the benefits of a varied pricing approach.
By expanding pricing options and aligning them with customer outcomes, tech services leaders can strengthen their services-based business and capitalize on growth opportunities in asset-based services.
Steps for pricing asset-based services
To properly price asset-based services, technology leaders must:
- Prioritize assets and IP: Make assets and intellectual property core to service delivery by investing in modular, flexible, and repeatable solutions. Develop metrics that demonstrate faster time to value and focus on contextualized, industry-specific outcomes.
- Adopt hybrid pricing models: Utilize a mix of commercial models that simplify client understanding and directly tie to customer outcomes. This approach ensures that pricing reflects the true value delivered to clients.
- Invest in professional practices: Ensure the success of asset-based services by funding professional product engineering, product-centric operating models, and effective sales engagement.
To fully monetize their assets, technology leaders must effectively communicate the value of their offerings, connecting them to the desired business outcomes clients seek. By adopting a comprehensive approach to pricing and positioning, service providers can navigate the evolving landscape and maximize the potential of asset-based services.
Katie Gove is a VP Analyst in Gartner’s Technology and Service Provider Research team, where she covers the services market. Katie and other Gartner analysts will provide further analysis on these topics at Gartner Tech Growth & Innovation Conference, taking place March 10-11 in Grapevine, TX.
