Idea in Brief

The Message

In response to economic pressures, companies should reexamine not just their prices but their pricing strategy—they should look for different ways to charge customers.

The Tactics

Many of the best pricing innovations result from borrowing models from other industries—offering to rent a product that’s typically bought, selling a service by the hour instead of by the day, or applying technology to better measure how much of something consumers are really using.

The Implementation

Consider which pricing tactics have the most potential to attract new customers and drive revenue, along with the costs of each. By adding new pricing options, you increase the odds that customers will find one tailored to their needs.

For nearly a century, most auto insurance companies have priced their services in the same way, charging customers an annual premium for unlimited driving. The premium varies depending on a driver’s age, vehicle, driving history, estimated annual mileage, coverage levels, and other factors, but the basic pricing scheme—an annual premium—has been an industry standard.
A version of this article appeared in the January–February 2023 issue of Harvard Business Review.
Read more on Pricing strategy or related topics Customer strategy, Consumer behavior, Customer experience and Behavioral science