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Shift to Outcome-Based Pricing Models Essential for Successful Marketing of Generative AI Products

Outcome-based pricing is transforming the marketing strategies for generative AI products.

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News Summary

The article discusses the necessity for marketers of generative AI products to transition from traditional pricing models to outcome-based pricing strategies. It explores the inadequacies of per-seat pricing and highlights the importance of demonstrating value through real-world outcomes. Companies need to understand customer processes better and adopt value assessment tools, shifting focus from the product to the outcomes delivered.

Shift to Outcome-Based Pricing Models Essential for Successful Marketing of Generative AI Products

At the heart of today’s tech transformation is the rapid advancement of generative artificial intelligence (often called gen AI). As this technology progresses, something pretty significant is becoming clear: it’s high time we move away from traditional pricing strategies and start embracing outcome-based models.

The Old vs. The New

Now, many of us are familiar with the old-fashioned way of pricing software, especially when it comes to the popular software-as-a-service (SaaS) products. Typically, these products are priced based on capabilities or how much value they provide to customers. But guess what? The tried-and-true per-seat pricing method is still ruling the roost, despite the clear shifts happening within the industry.

But here’s the kicker: marketing gen AI products doesn’t just hinge on basic pricing strategies; we need to tell compelling value stories and carry out thorough economic value assessments. Unfortunately, many tech providers are still dragging their feet on this front. It’s becoming clear that the benefits delivered by gen AI simply can’t be captured adequately with traditional pricing structures anymore.

The Real Value of Gen AI

If you think about it, gen AI products offer outcomes that were previously unattainable—think about the potential! Given this reality, conventional pricing models just can’t keep up. Thanks to significant venture capital investments, we are seeing innovation soar, and with it, some vendors are beginning to take note by adopting more fitting pricing strategies that truly reflect the immense value of the outcomes they’re providing.

One big takeaway is that the resources needed to realize specific outcomes with gen AI can be quite unpredictable. This showcases the inadequacy of per-seat models, which often fail to demonstrate overall value and ROI concretely. As agentic AI capabilities rise, we’re bound to see a shift in focus from pricing based on individual user seats to pricing based on the outcomes achieved. In essence, traditional seat-based pricing may soon feel like a relic of the past.

A Shift Towards Consumption-Based Models

Interestingly, some AI companies have started adopting consumption-based models, where they price services according to credits used or functions performed. This can look like charging customers based on specific actions, such as recovered chargebacks or the number of successful resolutions accomplished through automation.

The real beauty of gen AI lies in the outcomes it delivers, much like how the true potential of quantum computing is measured by the results it yields. Therefore, it’s evident that successful marketing should focus on the tangible business value that these AI products can deliver, rather than merely spotlighting the tools or methods involved.

The Road Ahead for Marketers

Shifting to outcome-based pricing isn’t just a walk in the park. It requires a real evolution in how tech organizations create value propositions and narratives. Marketers need to dig deeper into understanding their customer processes and desired outcomes. It’s not just about what gen AI can do; it’s about what it can actually deliver in real-world scenarios.

To convince buyers effectively, being proficient in value assessment is absolutely essential. This calls for smart utilization of value management tools. Also on the horizon are emerging “value agents” capable of delivering real-time value reporting—how exciting is that? This development is bound to streamline the assessment of outcomes, making those calculations feel concrete instead of purely speculative.

As gen AI products step in to automate tasks that were once handled by humans, discussions will likely shift to an even broader spectrum—focusing on the overall benefits to the customer rather than minute details. This brings us to an exciting point of exploration: the upcoming Gartner Tech Growth & Innovation Conference will focus on how technology service providers can leverage these emerging technologies for growth and innovation.

In Conclusion

As we navigate through these changes, one message from industry experts is crystal clear: outcome-based pricing is essential in the ever-evolving tech landscape. The shift has begun, and it’s shaping the future of how we value and market generative AI products. Buckle up—it’s shaping up to be an exhilarating ride!