Ibbaka Pricing for Innovation (Presented for New Media BC)
2 likes108 views
Pricing is one of the most powerful levers to influence monetization. An overview of values, segmentation and pricing methods used to capture increased revenues, market share or profitiability
Ibbaka Pricing for Innovation (Presented for New Media BC)
- 3. A"BIT"ABOUT"US 3 I Ibbaka"息"2018 Whose"dealing"in""B2B,"B2C,"B2G" markets? Anyone"in"M2M? What"role?" How"many"of"you"are"responsible" for"pricing? Early"stage"ventures?
- 4. EARLY&STAGE 4 I Ibbaka&息&2018 Aspects&of&your&company&may&be&incomplete Management&team&may&be&lacking&key&individuals Product&is&still&in&development,&or& Product&is¬&yet&on&the&market&in&a&commercialised&form,&(typically&in&beta)& If&commercially&available,&the&product&is&generating&revenues&but&on&a&limited&basis May&have&filed&for&patents&for&proprietary&technologies Funding&is&transitioning&from&founders,&friends&&&family Looking&to&attract&funds&from&accelerators,&angels&and&maybe&VCs
- 5. KEY$TAKEAWAYS 5 I Ibbaka$息$2018 Pricing'is'central'to'how'you'communicate'your'value'and'position'your'offer Value$has$economic$and$emotional$aspects$ both$matter Market$segmentation$is$the$foundation$of$your$pricing$strategy Connect$the$value'metric'to$the$pricing'metric Pricing$power$is$important$to$investors
- 6. AGENDA 6 I Ibbaka+息+2018 Pricing'is'central'to'how'you'communicate'your'value'and'position'your'offer'* Your+pricing+is+part+of+your+innovation Pricing+changes+across+the+product+lifecycle Pricing+is+based+on+the+value+you+provide+to+your+customers Value+has+economic+and+emotional+aspects+ both+matter+* Market+segmentation+is+the+foundation+of+your+pricing+strategy Pricing+methods+ when+to+use Connect+the+value'metric'to+the+pricing'metric'* Pricing+power+is+important+to+investors+*
- 8. PRICING'AS'AN'INNOVATOR 8 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Power'by'the'Hour'(PBH)'AA PerformanceAbased'Logistics'(PBL) Shared'risk'and'incentives' between'suppliers'and' customers Reference'source:'http://panmore.com/generalAelectricAgeAgenericAstrategyAintensiveAgrowthAstrategies'
- 9. Pricing'changes'over'the'Moore'technology'lifecycle PRICING'CONCEPTS' PRICING'OVER'THE'LIFECYCLE'1 9 I 鴛恢恢温一温&#恰27;息&#恰27;2018
- 10. Innovators)and)Early)Adopters)Buy)for)Different)Reasons PRICING)CONCEPTS) PRICING)OVER)THE)LIFECYCLE)2)(Initial)Phases) 10 I Ibbaka)息)2018 Innovators)tend)not)to)pay)but)influence)Early)Adopters Early)Adopters)pay)a)premium)for)a)competitive)advantage
- 11. Value&Driver&Structure&Changes&Between&Bowling&Alley&and&Tornado PRICING&CONCEPTS& PRICING&OVER&THE&LIFECYCLE&3&(Early&Majority) 11 I Ibbaka&息&2018 Bowling&Alley&Buyers&Reference&Each&Other Value&Drivers&Specific&to&Their&Vertical Tornado&Buyers&Buy&Because&Everyone&is&Buying Switch&to&Horizontal&Value&Drivers
- 12. Main%Street%B2B%Buyers%Are%More%Economic%Value%Driven PRICING%CONCEPTS% PRICING%OVER%THE%LIFECYCLE%4%(Late%Majority) 12 I Ibbaka%息%2018 On%Main%Street Solutions%Proliferate Targeted%at%Tight%Niches Without%Differentiation%Commodity%Pricing% Prevails
- 13. Laggards'Buy'Technology'Bundled'Into'Other'Solutions'They'Already'Have PRICING'CONCEPTS' PRICING'OVER'THE'LIFECYCLE'5'(Laggards) 13 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Laggards'Dont'Buy'Technology'Solutions They'Buy'Solutions'They'Are'Familiar'With and'Already'Have
- 14. What%is%value? 1. Is%for%a%specific%customer%(or%segment) Does%not%depend%on%costs Is%not%the%value%of%the%customer%to%the%vendor 2. Is%relative%to%the%alternatives There%is%always%an%alternative The%alternative%is%not%necessarily%your%direct%competitor 3. Has%emotional%and%economic%components Today%B2B%requires%both%economic%and%emotional%value%drivers If%either%are%nil%or%even%weak,%pricing%power%evaporates PRICING%CONCEPTS% VALUEOBASED%PRICING%% WHAT%IS%VALUE? 14 I Ibbaka%息%2018
- 15. Maslows(Hierarchy Provides)a)good)way)to)frame)emotional) value Basic)functionality)(that)drives)most) economic)value))is)not)a)powerful)way)to) frame)emotional)value The)higher)up)the)hierarchy)you)can) position)your)offer)the)more)pricing) power)you)will)have PRICING)CONCEPTS) VALUEHBASED)PRICING)) EMOTIONAL)VALUE 15 I Ibbaka)息)2018 Self(Esteem Community Security Basic(Functionality Self Realization Pricing(Power
- 16. Role%Specific Emotional)value)tends)to)be)role)specific You)need)to)map)it)for)each)role)in)your) stakeholder)map For)some)roles,)lead)with)emotional) value,)for)others)lead)with)economic) value)drivers PRICING)CONCEPTS) VALUEIBASED)PRICING)) EMOTIONAL)VALUE 16 I Ibbaka)息)2018 Self%Esteem Community Security Basic%Functionality Self Realization Pricing%Power
- 17. Economic'Value'Estimation'(EVE) Developed(by(Tom(Nagle Value(drivers(measure(the(impact(of(your( solution(on(your(customers(P&L(relative( to(an(alternative Always(consider(your(own(shortcomings( and(unique(costs(relative(to(the( alternative PRICING(CONCEPTS( VALUEJBASED(PRICING(( ECONOMIC(VALUE((ECONOMIC(VALUE(ESTIMATION) 17 I Ibbaka(息(2018 Price(of( Alternative Options Risk CapEx OpCap OpEx Revenues + Value'Drivers Shortcomings Unique(Costs 5 Value'Drivers Differentiation Value Price Range
- 18. PRICING'CONCEPTS' VALUE1BASED'PRICING' ECONOMIC'VALUE'VALUE'DRIVERS 18 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Price'of' Alternative Options Risk CapEx OpCap OpEx Revenues + Value'Drivers Shortcomings Unique'Costs 1 Value'Drivers Differentiation Value Price Range VALUE5DRIVER EXAMPLES Increase revenues Pipeline Market'access Market'scale Decrease'operating'expenses Efficiency Effectiveness Input costs Decrease'operating'capital Inventory Collections Decrease'capital'investment Get'more'productivity'from existing'assets Decrease'risk Liability Disruption Increase'options Cover'edge'cases Multiple'suppliers There'are'some'examples'of'applying'this'model'to'things other'than'dollars,'like'Quality'Adjusted'Life'Years
- 19. 19 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Customer'Needs Your'Offer Alternative Unmet Needs Commodity Your Differentiation PRICING'CONCEPTS' VALUEHBASED'PRICING'' ANOTHER'VIEW'OF'DIFFERENTIAION Competitor Differentiation Irrelevant Functionality Irrelevant Functionality Price'of' Alternative Options Risk CapEx OpCap OpEx Revenues + Value'Drivers Shortcomings Unique'Costs 2 Value'Drivers
- 20. DISCUSSION() EXAMPLES 20 I Ibbaka(息(2018 Can(we(hear(from(the(audience(examples(on(value(drivers?(
- 21. CORE%CONCEPT:%VALUE 21 I Ibbaka%息%2018 Understanding%value%is%the%foundation%for Market%Segmentation ValueHBased%Pricing Marketing%Strategy ValueHBased%Sales Without%value There%is%nothing%to%price
- 22. DEMOGRAPHIC,SEGMENTATION 22 I Ibbaka,息,2018 The,simplest,and,most,common,form,of,segmentation,is,demographic, (or,firmographic) Do,firms,of,a,similar,size,,or,in,a,similar,industry,,or,in,the,same,geography,all,buy, in,the,same,way?
- 23. DEMOGRAPHICS-OFTEN-FAIL 23 I Ibbaka-息-2018 Lives-in-a-castle Rich 69-year-old Cares-about-family
- 24. DEMOGRAPHICS-OFTEN-FAIL 24 I Ibbaka-息-2018 Ozzie%Osborne Prince%Charles Lives-in-a-castle Rich 69-year-old Cares-about-family
- 25. SEGMENTATION*IS*THE*FOUNDATION 25 I Ibbaka*息*2018 Segmentation*is*the*foundation*of* marketing The*goal*is*to*connect*similar* customers*into*groups*to*simplify Marketing Sales Support Pricing Companies*in*the*same*segment*should*behave*in*similar*ways*and*respond*to*similar*value*propositions
- 26. CORE%CONCEPT:%A%GOOD%SEGMENTATION 26 I Ibbaka%息%2018 A%good%segmentation%brings%together%companies%that 1. Buy%in%the%same%way 2. Get%value%in%the%same%way 3. Will%act%as%reference%for%each%other% (especially%important%in%launching%a%new%offer)
- 27. PRICING'CONCEPTS' PRICING'METHODS 27 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Model Strengths Weaknesses Use1When Cost1 Plus Well'Understood Ensures'Profit Generally Under'Prices Costs'Not'Understood Client'Controls'Deliverables Market1 Following Responsive to'Market Does'Not'Reflect'Value Passive Commodities Input1 Based Responsive'to'Market Shows'Understanding'of' Customer'Business Lack'of'predictability'(for both' sides) Market'is'very'sensitive'to external'variables'like'energy' prices'or'interest'rates Value Based Most'Flexible'(supports' different'pricing'strategies) Requires'deep'understanding'of' customer'business'&'upfront' investment Offers'are'differentiated Market1leadership1requires1one1move1from1market1following1pricing1to1valueBbased1pricing
- 28. You$cannot$optimize$for$everything,$a$good$pricing$ strategy$requires$clear$alignment$on$goals Category$growth$(float$all$boats) Category$share$(get$a$bigger$share$of$the$pie) Revenue$(top$line$growth) Gross$Profit$(net$profit$is$impacted$by$too$many$other$ variables) Unit$Economics$(Lifetime$Value$of$Customer) Facility$Utilization$(where$this$has$a$big$impact$on$ costs) PRICING$CONCEPTS$K PRICING$STRATEGIES$K OPTIMIZATION 28 I Ibbaka$息$2018 What%are%the% pricing%goals%at% your%organization? (What$do$you$need$ to$optimize?)
- 29. There%are%three%basic%pricing%strategies Skimming%(or%Premium)% Charge%the%maximum% price%that%your%pricing%power%allows%(often%in% order%to%invest%heavily%in%continuing%innovation% and%value%creation%for%customers) Market%Following% price%relative%to%a%market% leader Penetration% price%as%low%as%possible%to%grow% the%overall%market%or%to%increase%category%share PRICING%CONCEPTS%H PRICING%STRATEGIES%H THE%THREE%STRATEGIES 29 I Ibbaka%息%2018
- 30. 30 I 鴛恢恢温一温&#恰27;息&#恰27;2018 PRICING'CONCEPTS' VALUE'METRICS'AND'PRICING'METRICS Value&Metric Pricing&MetricShould'Track The'unit'of' consumption'of'your' product'or'service'that& tracks&value&created The'unit'of' consumption'of'your' product'or'service'that& is&used&to&set&prices
- 33. 33 I Ibbaka&息&2018 PRICING&CONCEPTS& CHOOSING&A&PRICING&METRIC Tracks'differences'in'value'across'segments Tracks'differences'in'cost'to'serve Easy'to'measure'and'enforce Gives'favorable'positioning Aligns'with'buyers' experience'of' value Pricing Metric
- 34. EXAMPLES 34 I Ibbaka.息.2018 安看顎鉛糸.壊看馨艶看稼艶.韓姻看馨.岳鞄艶.温顎糸庄艶稼界艶.鉛庄一艶.岳看.壊鞄温姻艶.岳鞄艶庄姻.厩温鉛顎艶p姻庄界庄稼乙.馨艶岳姻庄界?
- 35. PRICING'POWER 35 I 鴛恢恢温一温&#恰27;息&#恰27;2018 The'single'most'important'decision' in'evaluating'a'business'is pricing' power.'If'you've'got'the power to' raise prices without'losing'business' to'a'competitor,'you've'got'a'very' good'business.'And'if'you'have'to' have'a'prayer'session'before'raising' the price by'10'percent,'then'you've' got'a'terrible'business. Warren'Buffet
- 36. PRICING'MATTERS'TO'INVESTORS 36 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Pricing'is'where'all'of'your'critical'marketing'decisions'come' together Investors'will'assess'your'pricing'strategy'and'pricing' performance
- 37. PRICING'MATTERS'TO'INVESTORS 37 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Market'Segmentation'demonstrates'your' understanding'your'market'opportunity' Patterns'of'needs,'attitudes,'behaviors' To'identify'customers'who'value'your'differentiation'and' the'value'they'will'receive Underpins'calculation'of'market'size Customer'Targeting'shows'youve'identified'your'most' attractive'segment Prioritizes'your'marketing'investment'(financial'and'effort) Understand'your'customers'buying'process
- 38. PRICING'MATTERS'TO'INVESTORS 38 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Unique'and'Differentiated'Value'Proposition Determines'your'ability'to'realize'your'potential'earnings Is'always'relative'to'the'next'best'competitive'alternative.' Investors'want'to'know'that'you'have'done'your' competitive'analysis.' Market'Sizing Provides'an'indication'of'potential'earnings Does'your'TAM,'SAM,'SOM'justify'your'valuation'
- 39. PRICING'MATTERS'TO'INVESTORS 39 I 鴛恢恢温一温&#恰27;息&#恰27;2018 Customer'Traction'quantitative'evidence'of'market' demand" Validation'that'value'is'being'created Price'Optimization Pricing'is'the'lever'to'win'higher'profits,'revenue'or'market' share Connecting'to'your'buyers'emotional'and'economic needs The'correct'pricing'metrics'helps'you' to'monitor'price'acceptance guide'behavior'across'pricing'tiers,'and' be'better'prepared'for'competitive'positioning
- 40. CREATE&VALUE 40 I Ibbaka&息&2018 Create&and&capture&value&for&customers&and&your& investorsall&stakeholder Pricing&is&where&your&marketing&strategy&gets&real You&and&your&customer&need&to&agree&on&price&to&win& a&sale Price&to&create&and&capture&value&for&all
- 41. THINGS'TO'DO'TOMORROW 41 I 鴛恢恢温一温&#恰27;息&#恰27;2018 1. Figure'out'if'you'have'pricing'power. Can'you'raise'prices? What'can'you'do'to'increase'your'ability'to'raise'prices? 2. Answer'Which'of'our'customers'gets'the'most'value'from'our'offer? 3. Checkout'www.Ibbaka.com/selfRassessment
- 45. IBBAKA%BACKGROUND 45 I Ibbaka%息%2018 Ibbaka%is%a%consulting%and%technology%development%company%focused%on%helping%companies%bring&innovations&to& market&and%to%help%them%to%scale. We%do%this%by%bringing%new%approaches%to%market&segmentation,&customer&targeting&and&pricing&design to%our% clients%and%supporting%them%with%data&science. The%team%has%extensive%experience%in%market%segmentation%and%pricing%at%companies%of%all%scales,%from%Fortune%50%to% prePrevenue%startPups. We%present%frequently%at%marketing,%product%management%and%professional%pricing%events.%Follow%our%blog%at% www.ibbaka.com