Pricing Innovations: Value Based Pricing
- 1. Copyrighted and All Rights Reserved- by Pricing Innovations 1 VALUE-BASED PRICING Pricing | Monetization | Go-to-Market PRICING INNOVATIONS
- 2. Copyrighted and All Rights Reserved- by Pricing Innovations 2Hello. We are Pricing Innovators. We’re a product consultancy focusing on innovations in pricing. We go beyond making monetization recommendations, and inform all aspects of your product, offer, pricing, and cost structures as well as your go-to-market plan. We’ve set out to reimagine the way we innovate, develop and monetize products that meet their revenue and profit goals.That’s why we created the Pricing Canvas ™. Make sure to check out our Pricing Canvas ™ Guide on SlideShare. Pricing & Launching New Products Pricing Multi-Tiered Offers & SaaS Changing Monetization Models Changing Prices & Pricing Structures Monetizing Product Lifecycle
- 3. Copyrighted and All Rights Reserved- by Pricing Innovations 3 PRICING & MONETIZATON BASICS
- 4. Copyrighted and All Rights Reserved- by Pricing Innovations 4 Today, more than 80% of the companies innovate and launch their new products using a “product-focused” innovation process that fails to align the four key structures of a solution. Most new solutions fail to • Solve for the gap in customer needs and expectations • Capture different types of buyers’ willingness to pay • Align their revenue structures with the benefits received by the different types of buyers • Execute a market play with a competitive and profitable cost structure. Product-focused Innovation Product Cost Price Value Customer
- 5. Copyrighted and All Rights Reserved- by Pricing Innovations 5 ”Value-focused” innovation and monetization process not only helps you develop the products that people will actually buy but also align your product, offer, pricing, and cost structures with the true dynamics of your buyers, users, and market. Value-focused Innovation Go-to-Market Test & Plan Cost & Product Structure Value Metric & Pricing Value Stack Value Gap Analytics & Metrics
- 6. Copyrighted and All Rights Reserved- by Pricing Innovations 6 VALUE = Willingness to Pay – Opportunity Cost
- 7. Copyrighted and All Rights Reserved- by Pricing Innovations 7 “Value” is a quantitative notion, not a creative or qualitative one, and if nobody pays for it, no value is created. And this is hard to swallow for product owners. Product owners usually overestimate the value of a solution since they have the most complete vision and the value is delivered as a whole. However, most customers’ willingness to pay is driven by some key parts rather than the whole which are called non-compensatory and compensatory features. For buyers, value has many different forms: economic, financial, emotional, social, perceived, relative, reference, floor, differentiated, tangible, intangible, psychological, etc. Product Owners Buyers
- 8. Copyrighted and All Rights Reserved- by Pricing Innovations 8 STRUCTURAL DRIVERS OF VALUE Product structure: How value is created and perceived Offer structure: How value is offered and accessed Pricing structure: How value is monetized and realized Cost structure: How value provides competitiveness and profitability
- 9. Copyrighted and All Rights Reserved- by Pricing Innovations 9 Value Stack Value Gap Value Innovation Value Metric Product structure Cost structure Offer structure Pricing structure
- 10. Copyrighted and All Rights Reserved- by Pricing Innovations 10STRUCTURAL FOCUS BY GROWTH GOALS Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure DRIVE COMPETITIVENESS DRIVE ACQUISITION DRIVE MONETIZATION DRIVE PROFITABILITY
- 11. Copyrighted and All Rights Reserved- by Pricing Innovations 11STRUCTURAL FOCUS BY PRODUCT LIFESTAGE Optimize for new & pre-revenue products Drives acquisition, monetization & top- line growth metrics Optimize for existing products & product lines Drives profitability, retention, & bottom- line growth metrics Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure Offer Structure Product Structure Cost Structure Pricing Structure
- 12. Copyrighted and All Rights Reserved- by Pricing Innovations 12 THE GOLDEN RULE OF PRICING Develop offerings that people will acquire, for a price commensurate with the benefit delivered, at a cost structure more favorable than the competition.
- 13. Copyrighted and All Rights Reserved- by Pricing Innovations 13Pricing is not about “prices” Getting pricing right means identifying the pricing structure, pricing model, and pricing window, that drives acquisition, monetization, and profit growth - all at once.That is what it takes to make it in the market. ACQUIRE MONETIZE GROW The right pricing structure aligns your offering with the value stacks of different types of buyers, and drive acquisition. The right pricing model allows you to monetize your product features and attributes in ways that their benefits are realized by your buyers. You can increase your customers’ lifetime value as they continue to realize the offer’s benefits. Customers pay more, as they receive more value. PRICING STRUCTURE PRICING MODEL PRICING WINDOW Align your product structure with your different buyer types Align your profit model with how different buyers benefit differently Align the value you deliver with your buyers’ willingness to pay
- 14. Copyrighted and All Rights Reserved- by Pricing Innovations Price Best for Benefit #1 Benefit #2 Benefit #3 Benefit #4 Benefit #5 Price Best for Tier #3 CTA Benefit #11 Benefits #12 Benefit #13 CTA Price Best for Tier #1 Benefit #6 Benefit #7 Benefit #8 Benefit #9 Benefit #10 CTA Pricing structure 14 Align your pricing structures with the ways in which different buyers need, buy, utilize, and benefit from the benefits differently. In the case that you have 10, 20 different types of buyers, perform a frequency distribution to identify the top 3-4 which address more than 60% of your market. And remember: people don’t buy features; they buy benefits.You must translate the features and attributes into benefit statements. Tier #1
- 15. Copyrighted and All Rights Reserved- by Pricing Innovations 15 Basic Plus Team Enterprise Get hands-on experience with the innovative solution Realize benefits commensurate with the price Upgrade for achieving more of the same benefits Upgrade for achieving new benefits Upgrade for achieving even more benefits Upgrade for benefiting in a different way Upgrade for benefiting in a different scale 15 Pricing model Align the value delivered with the various pricing windows. Determine whether or not you can create multiple tiers or plans and how you will mobilize buyers from lower priced tiers to higher priced tiers. Instill fences, caps, and triggers to influence the buying behavior.
- 16. Copyrighted and All Rights Reserved- by Pricing Innovations 16 Positive Differentiation Reference Point Negative Differentiation Pricing Window Reference Value Economical Value Floor Value Relevant Costs Pricing window Align your pricing window with the benefits realized. Quantify the reference value, differentiated value, floor value, and economical value, and deduct a pricing window for each of the pricing plans.
- 17. Copyrighted and All Rights Reserved- by Pricing Innovations 17 Pricing New Products We’ve helped an ed-tech SaaS company to identify a brand-new segment, reconfigure its product and pricing structures, and adjust its go-to-market plan which created an additional $1.5M annual revenue potential. Pricing Multi-Tiered Offers & SaaS We’ve helped a medical technology company to productize a new digital service for its 3,000+ customer base and align its pricing plan with the customers’ revenue upside creating an additional $3.2M annual revenue potential and 15% improvement in customer retention. Changing Monetization Models In healthcare, the biggest question is “Who pays?” We are cracking at that question everyday. We’ve helped a healthcare delivery technology company to set up new partnership models with hospitals and get their pricing structures right which expanded their addressable market by 420%. Changing Prices & Pricing Structures Our client – a prominent design agency – had continued adding new features and improvements on their technology product for over five years without any pricing adjustments.We helped them restructure their offering and roll out a new pricing plan.The new plan had no impact on their existing churn rates while creating an average 17% increase in their annual profits. Monetizing Product Lifecycle We’ve helped a financial technology company to price their future product roadmap and align their cost structure with alternative sales and revenue models.The realignment enabled a 12% more favorable cost structure than initially planned and opened up three new industry verticals. Pricing can drive revenue and profits in new and different ways
- 18. Copyrighted and All Rights Reserved- by Pricing Innovations Rapid Pricing Assessment $ per day PRICING DATA ANALYSIS PRICING WORKSHOP PRICING PLAN Monetization-as-a-Service $$$ per month GROWTH Learn moreLearn more 6-12 Weeks Team Coaching $$ per week PRODUCT Learn more We walk the talk: here’s our own pricing structure 18 What we deliver An opportunity analysis and pricing plan using the principles of the Pricing Canvas (TM). What we deliver A strategic, competitive, value- based pricing strategy, pricing structure, and go-to-market plan. What we deliver A comprehensive monetization plan for your portfolio, and systematic adjustment of pricing and roadmap. DATA CAMPAIGNS 10-D ALIGNMENT GO-TO-MARKET PLAN MONETIZATON MOBILIZATION ONGOING MONITORING
- 19. Copyrighted and All Rights Reserved- by Pricing Innovations Schedule a Rapid Pricing Assessment today ✉ info@pricinginnovations.com 📞 +1-(612) 351-2503 @pricingpros What new revenue and profit opportunities can pricing innovations create for you? Let’s find out! Book a Rapid Pricing Assessment Today!
Editor's Notes
- #4: So in microeconomic terms value is a quantifiable notion and it equals customers’ willingness to pay minus their opportunity cost. The core of value innovation lies in creating the differentiated products and services that maximize customers’ willingness to pay and minimize their opportunity costs. And again, in microeconomic terms, value isn’t being created unless you can monetize it. Think of all those features and product attributes you throw around in your product discussions, think of all the amazing ways your product impacts your customers. And notice that those features that customers are willing to pay for matter more than anything, and you have to get THOSE right, in order to make it. This one is a particularly hard one to swallow for product owners, designers, and engineers since they are so close to their product and have a much more complete vision of it than their customers ever will. Believe me, I’ve been in all those positions and it was like people were asking me to kill my baby, it’s hard it just is. To make it in the market, what people are willing to pay for and how much matters more than anything else.
- #7: So in microeconomic terms value is a quantifiable notion and it equals customers’ willingness to pay minus their opportunity cost. The core of value innovation lies in creating the differentiated products and services that maximize customers’ willingness to pay and minimize their opportunity costs. And again, in microeconomic terms, value isn’t being created unless you can monetize it. Think of all those features and product attributes you throw around in your product discussions, think of all the amazing ways your product impacts your customers. And notice that those features that customers are willing to pay for matter more than anything, and you have to get THOSE right, in order to make it. This one is a particularly hard one to swallow for product owners, designers, and engineers since they are so close to their product and have a much more complete vision of it than their customers ever will. Believe me, I’ve been in all those positions and it was like people were asking me to kill my baby, it’s hard it just is. To make it in the market, what people are willing to pay for and how much matters more than anything else.
- #8: So in microeconomic terms value is a quantifiable notion and it equals customers’ willingness to pay minus their opportunity cost. The core of value innovation lies in creating the differentiated products and services that maximize customers’ willingness to pay and minimize their opportunity costs. And again, in microeconomic terms, value isn’t being created unless you can monetize it. Think of all those features and product attributes you throw around in your product discussions, think of all the amazing ways your product impacts your customers. And notice that those features that customers are willing to pay for matter more than anything, and you have to get THOSE right, in order to make it. This one is a particularly hard one to swallow for product owners, designers, and engineers since they are so close to their product and have a much more complete vision of it than their customers ever will. Believe me, I’ve been in all those positions and it was like people were asking me to kill my baby, it’s hard it just is. To make it in the market, what people are willing to pay for and how much matters more than anything else.
- #9: So in microeconomic terms value is a quantifiable notion and it equals customers’ willingness to pay minus their opportunity cost. The core of value innovation lies in creating the differentiated products and services that maximize customers’ willingness to pay and minimize their opportunity costs. And again, in microeconomic terms, value isn’t being created unless you can monetize it. Think of all those features and product attributes you throw around in your product discussions, think of all the amazing ways your product impacts your customers. And notice that those features that customers are willing to pay for matter more than anything, and you have to get THOSE right, in order to make it. This one is a particularly hard one to swallow for product owners, designers, and engineers since they are so close to their product and have a much more complete vision of it than their customers ever will. Believe me, I’ve been in all those positions and it was like people were asking me to kill my baby, it’s hard it just is. To make it in the market, what people are willing to pay for and how much matters more than anything else.
- #10: So we said, what if we put the value equation to the center, how can we influence these structural failures? And we came up with a value-focused innovation process which we believe addresses some of these structural issues we mentioned and enables you to get to a minimally viable business and beyond. That’s what we’ll talk about the rest of our time today.
- #13: So in microeconomic terms value is a quantifiable notion and it equals customers’ willingness to pay minus their opportunity cost. The core of value innovation lies in creating the differentiated products and services that maximize customers’ willingness to pay and minimize their opportunity costs. And again, in microeconomic terms, value isn’t being created unless you can monetize it. Think of all those features and product attributes you throw around in your product discussions, think of all the amazing ways your product impacts your customers. And notice that those features that customers are willing to pay for matter more than anything, and you have to get THOSE right, in order to make it. This one is a particularly hard one to swallow for product owners, designers, and engineers since they are so close to their product and have a much more complete vision of it than their customers ever will. Believe me, I’ve been in all those positions and it was like people were asking me to kill my baby, it’s hard it just is. To make it in the market, what people are willing to pay for and how much matters more than anything else.