Making pricing models customer-centric

New business model for selling light bulbs

I recently (early 2016) read about the Danish company HeSaLight, developers and manufacturers of energy-efficient LED lighting solutions. However, this apparently increasingly controversial company seems much more interesting for the (currently controversial) ideas at the heart of its payments model than for its products or its business practices (which took a lot of flak in the business press primo 2016, and in 2017 the company went spectacularly bust – followed soon after by prosecution of the founder and former chief executive for major financial irregularities and USD 80 million fraud – although that doesn’t really affect this narrative and the thoughts behind it).

With cash-flow positive financing based on calculations of energy savings and interest-free payment plans in which the payback period is financed by the savings generated, as well as flexible payment terms to fit the lighting buyer’s specific financial agendas, HeSaLight seemed to have seriously rethought the business model for purchasing.

HeSaLight payment structure

HeSaLight claimed to be able to generate savings of as much as 50–85% on users’ electricity bills, which certainly provides solid financial underpinnings for the HeSaLight business model. This would probably be less applicable for things like TV purchases.

But it would seem that the HeSaLight approach could well form an interesting basis for a wider rethink of how purchasing transactions can be structured. This is especially true when there’s such an exponential expansion of available metrics – driven by things like data and app proliferation as well as cheap sensors, the omnipresent GPS registration, etc. – to provide a basis for documented use/benefit.

Running into accounting wrinkles

In early May 2016, HeSaLight ran into yet another Danish shitstorm when Erhvervsstyrelsen ( the Danish Business Authority) instructed the company to deliver a new set of accounts for 2014. Both before and after, all kinds of accountants and academics had been busy casting aspersions over the company’s accounting practices.

I don’t know enough about these arcane arts to have an opinion, but it somehow seemed symptomatic that a company attempting (whether honourably or not is irrelevant for the point I’m desperately trying to make!) to introduce a new business model that sends traditional thinking arse over tit is going to run into uncomfortable wrinkles with accountancy practices rooted in millennia-old buying-and-selling-of-goods practices.

Basically, HeSaLight sold its LED lighting to customers on credit, and the customer was then to pay back the loan over a long period (apparently up to 18 years in some cases) – financed by the savings. The problem for traditional bookkeeping was that HeSaLight entered the whole profit into its books as soon as the contract is signed. Which is the kind of accounting practice that gets traditionally minded auditors seriously hot under their professional collars.

OK, radical rethinks of business models may well also require radical rethinks of accounting practices to deal with new commercial phenomena, new collaboration and resource-optimisation perspectives. But that’s another story …

Courting customer-centric pricing structures

Traditional pricing structures – the way things have been done since the Stone Age, really –  are based on the exchange of a particular good for an agreed denominator of value. Because the transaction is fundamentally a one-shot “all or nothing” event, the seller/manufacturer has to make sure of getting his money to recoup his investment and make his profit. The customer, on the other hand, then has the item – whether they like it or not, use it or not, or benefit from it or not. item in hand swapped over with money in hand. Caveat emptor, guys.

This has basically been the fundamental basis for payments for so long that no one really questions it. The HeSaLight business model seemed to be a good example of one possible way of rethinking this whole pricing/payment structure for tangible hardware items (there’s already much more variety and inventiveness in the world of pricing services and intangibles).

Rethinking pricing structures to make them customer-centric – with payment structured and released in step with accrued benefit, for example – seems to provide radical new commercial opportunities and paths to greater customer satisfaction.