際際滷

際際滷Share a Scribd company logo

Your Price is Wrong: Pricing Your Products for Maximum Return, Alan Albert, MarketFit at ProductCamp 2017

A
Alan Albert

Voted "Best Session" by attendees at ProductCamp Portland 2017, Alan Albert presented Your Price is Wrong: Pricing Your Products for Maximum Return. A 1% improvement in your pricing can boost profits by more than a similar change to any other part of our organization. Yet most companies price their products poorly, leaving a lot of money on the table. The value of your products depends solely on how valuable your customers think they are. What if you could measure your customers' perception of the value of your products? Fortunately, you can measure your customers' perception of value. Qualitatively and quantitatively. And if you do measure your customers' perception of value, you can use this insight to create far better pricing models. You can generate more revenue, greater market share, and more profit. So why leave money on the table?

1 of 108
Download to read offline
market鍖t.com alan@market鍖t.com @A_Albert Presentation copyright 息 2017 Alan Albert All rights reserved Alan Albert How to price your products for maximum return Your Price is Wrong 1
How much do you pay for a coffee? 2
3
4
5
6
7
8
9
Tall Grande Venti Trenta 10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
How much do you pay for a coffee? 27
How to price your products for maximum return Your 28
Product Management Marketing Development Customer Service Manufacturing Design Quality Assurance Strategy CEO B2B Products & Services B2C Products & Services Startups Bootstrapped Venture-funded SMB Fortune 500 Cognitive Psychology Computer Science $1B Advisor Investor Director Chair Databases Personal productivity Business intelligence E-commerce Financial services Social networking Education Knowledge Management Home Grocery Shopping Online security Real estate software Video software Value Added Reselling Process Control Non pro鍖ts Publishing Brick & mortar retail Personal computing Enterprise software SaaS / Cloud computing Industrial technology Software development UI / UX Information architecture Input / output devices Mobile devices Corporate strategy Corporate partnerships Marketing automation Online marketplaces Pricing strategy Consulting services 29
Alan Albert market鍖t.com alan@market鍖t.com @A_Albert Strategic Services for Measurable Growth MARKETFIT Advisory Services Consulting Services Market Research Strategic Pricing Strategic Innovation Corporate Strategy Product / Marketing Strategy Business Coaching 30
Agenda How we think about pricing Customer values Value-based pricing Pricing for maximum return 31
The single most important decision in evaluating a business is pricing power Warren Buffet 32
Why is pricing important? Price COGS Volume SG&A 0 5 10 15 0.3% 1.7% 9.2% 10.4% Source: SMC 2010 1% improvement of Causes pro鍖ts to increase by 33
How is pricing set? Competition Cost Plus or market-based Asked Customers Guessed 0 25 50 75 18% 21% 24% 52% Source: 2013 Price Intelligently survey. Respondents were allowed to select more than one response. 34
How NOT to set pricing ? Competition Cost Plus Ask Customers Guess Your competitor sets the price Your costs set a 鍖oor for your price Your customers set the price Just wing it They dont know the right price either Dont let your costs set a ceiling Youre at their mercy Why would anyone want to do this? 35
? If pricing is so important Why are we so bad at it? How can we do better? 36
Agenda How we think about pricing Customer values Value-based pricing Pricing for maximum return 37
What is value? What we care about when making a buying decision From the customers perspective not the sellers 38
What do we pay for? 39
PRODUCT VALUES FEATURES BENEFITS 40
PRODUCT VALUES FEATURES BENEFITS 41
What determines value? 42
What determines value? Context Value Layers Differentiation Special Cases 43
Context Where? When? Why? Who? 44
You can create value by changing the context of the experience Context 45
Context You can create value by changing the context of the experience Where: On site vs. Laptop vs. Cloud When: Same day vs. Next week Why: Emotional vs. Functional Who: Millennials vs. Baby boomers 46
What determines value? Context Value Layers Differentiation Special Cases 47
Context VALUE LAYERS Different Values at Each Layer Product Solution Type Problem / Job to be Done Role / Identity 48
Role / Identity You can create value by targeting di鍖erent roles or identities 49
Role / Identity single / spouse / provider status-seeker brand-loyal You can create value by targeting di鍖erent roles or identities user / buyer purchasing agent distributor 50
Problem / Job to be Done You can create value by rede鍖ning the problem 51
Problem / Job to be Done You can create value by rede鍖ning the problem Lodging: Hotel vs. A place to stay Photos: Capturing memories vs Social sharing CRM: Managing prospects vs. Managing pipeline 52
Solution Type You can create value by changing the type of solution 53
Solution Type Lodging: Hotels vs. Couch Sur鍖ng Photos: Film vs. Digital vs. Disappearing CRM: On-premise vs. Cloud You can create value by changing the type of solution 54
You can create value through product innovation Product 55
AirBnB: Rating both hosts and guests Photos: Disappearing images and videos CRM: Integration with other cloud services Product You can create value through product innovation 56
Context VALUE LAYERS Different Values at Each Layer Product Solution Type Problem / Job to be Done Role / Identity 57
What determines value? Context Value Layers Di鍖erentiation Special Cases 58
Theres always an alternative Differentiation 59
Differentiation The Competition D I Y Do nothing Theres always an alternative 60
Differentiation Differentiation from the alternative defines product value If that differentiation isnt valued, your product has no more value than the competition Di鍖erentiation drives pricing power 61
How is your product different from the best alternative? What is the net value of those differences? Differentiation Di鍖erentiation defines value 62
What determines value? Context Value Layers Differentiation Special Cases 63
Special Cases Topics for another day Pricing Branding Targeting Channels Marketplaces Others 64
Pricing You can add value via Pricing Pricing models 65
Pricing A higher price can add value, by connoting: Higher quality Rarity / Exclusivity Desirability 66
A lower price can add value, by connoting: A good deal A limited-time offer Pricing 67
Pricing Models Pricing models are a great area for strategic innovation 68
Pricing Models Subscription vs Purchase: Salesforce.com All-you-can-eat Subscription: Net鍖ix Adaptive Subscriptions: Slack Membership: Amazon Prime Pricing model innovation creates value 69
What determines value? 70
What determines value? Your customers values Your own perception of value is irrelevant Your perception is not your customers perception So make sure you measure your customers values 71
Discovering Values 72
Agenda How we think about pricing Customer values Value-based pricing strategy Pricing for maximum return 73
Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy Start 74
75
What is your pricing objective? Market share Revenue Pro鍖t Retention Defend vs. new competitor Awareness / Trial Choose one 76
What is your pricing objective? Market share Revenue Pro鍖t Retention Defend vs. new competitor Awareness / Trial Align your entire team to achieve this one objective Choose one 77
Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 78
Segment for Maximum Return Different customer segments Have different willingness and ability to pay Get di鍖erent amounts of value from the same product 79
Different willingness and ability to pay Segment for Maximum Return Price sensitive > Low Margin Value sensitive Quality sensitive > High Margin 80
Price sensitive > Low Margin Value sensitive Quality sensitive > High Margin Segment for Maximum Return Different willingness and ability to pay 81
Value sensitive Pricing predicament Quality sensitive Price sensitive Perceived value & willingness to pay # of Customers Many Few Low High 82
Pricing predicament Low price Value sensitive Quality sensitive Price sensitive Perceived value & willingness to pay Many Few Low High # of Customers 83
Low price Many Few Seems right Pricing predicament Willing to pay more Cant afford Perceived value & willingness to pay Lost Customers! Low High Lost Revenue! Sweet spot Lost Revenue! # of Customers 84
Pricing predicament High price Value sensitive Quality sensitive Price sensitive Perceived value & willingness to pay Many Few Low High # of Customers 85
Cant afford Pricing predicament Seems rightCant afford Lost Customers! Lost Customers! Sweet spot Lost Revenue! Perceived value & willingness to pay Many Few Low High High price # of Customers 86
Solution: Segmentation Different segments get di鍖erent amounts of value from the same product Larger companies have more employees using your product use more advanced features make more transactions with your product 87
Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 88
Value Metric Value metric = the unit by which the customer measures value Value metric determines how much a customer is willing to pay Credit: Steven Forth 89
Value Metric Credit: Steven Forth Transactions Leads Impressions Value metric = the unit by which the customer measures value Value metric determines how much a customer is willing to pay New customers Time savings Risk reduction 90
Pricing Metric Pricing metric = the unit by which you set a price Find a pricing metric that closely tracks the value metric Credit: Steven Forth 91
Metrics The value metric comes from understanding your customers Your pricing metric is an important opportunity for innovation Credit: Steven Forth 92
Pricing Metrics in Action Pricing Secrets Company / Product Value Metric Pricing Metric Google Adwords Ad Effectiveness Pay per click Survey Monkey Survey complexity and sample size # of questions, responses, & some functionality Hubspot Clients target market size, marketing activity # of contacts, some functionality & add-ons KissMetrics Depth of app analytics Number of app events Toyota Performance, comfort, luxury Base model, engine, feature bundle 93
Segment for Maximum Return Di鍖erent market segments often have di鍖erent value metrics To maximize return, identify best metrics for each segment 94
Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 95
Enter the Pricing Grid 96
Enter the Pricing Grid Pricing metrics Market segments Prices 97
Enter the Pricing Grid Market segments? Prices? Are these the right Pricing metrics? 98
Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 99
Agenda How we think about pricing Customer values Value-based pricing strategy Pricing for maximum return 100
How to Price for Maximum Return Discover and measure what your customers value most Choose the right objective: Market Share? Revenue? Pro鍖t? Other? Segment your market based on their perception of value Identify your customers value metrics Build your pricing grid with matching pricing metrics Track, communicate and charge for value your customers perceive Test, measure, and iterate to optimize Start here Not here 101
Do you really know What your customers actually value? What is the value of your differentiation? What are the right segments? What are the right value metrics? What are the right pricing metrics? What are the right prices? 102
You dont have to guess What your customers actually value? What is the value of your differentiation? What are the right segments? What are the right value metrics? What are the right pricing metrics? What are the right prices? 103
All of these are knowable All of these depend on your customers perception of value Your customers perception of value can be measured 104
You wont 鍖nd the right price in the of鍖ce 105
Whats a cup of coffee worth? Coffee with customers to discover their values? PRICELESS 106
Thank You 107
market鍖t.com alan@market鍖t.com @A_Albert Presentation copyright 息 2017 Alan Albert All rights reserved Alan Albert Your Price is Wrong How to price your products for maximum return 108

More Related Content

Your Price is Wrong: Pricing Your Products for Maximum Return, Alan Albert, MarketFit at ProductCamp 2017

  • 1. market鍖t.com alan@market鍖t.com @A_Albert Presentation copyright 息 2017 Alan Albert All rights reserved Alan Albert How to price your products for maximum return Your Price is Wrong 1
  • 2. How much do you pay for a coffee? 2
  • 3. 3
  • 4. 4
  • 5. 5
  • 6. 6
  • 7. 7
  • 8. 8
  • 9. 9
  • 10. Tall Grande Venti Trenta 10
  • 11. 11
  • 12. 12
  • 13. 13
  • 14. 14
  • 15. 15
  • 16. 16
  • 17. 17
  • 18. 18
  • 19. 19
  • 20. 20
  • 21. 21
  • 22. 22
  • 23. 23
  • 24. 24
  • 25. 25
  • 26. 26
  • 27. How much do you pay for a coffee? 27
  • 28. How to price your products for maximum return Your 28
  • 29. Product Management Marketing Development Customer Service Manufacturing Design Quality Assurance Strategy CEO B2B Products & Services B2C Products & Services Startups Bootstrapped Venture-funded SMB Fortune 500 Cognitive Psychology Computer Science $1B Advisor Investor Director Chair Databases Personal productivity Business intelligence E-commerce Financial services Social networking Education Knowledge Management Home Grocery Shopping Online security Real estate software Video software Value Added Reselling Process Control Non pro鍖ts Publishing Brick & mortar retail Personal computing Enterprise software SaaS / Cloud computing Industrial technology Software development UI / UX Information architecture Input / output devices Mobile devices Corporate strategy Corporate partnerships Marketing automation Online marketplaces Pricing strategy Consulting services 29
  • 30. Alan Albert market鍖t.com alan@market鍖t.com @A_Albert Strategic Services for Measurable Growth MARKETFIT Advisory Services Consulting Services Market Research Strategic Pricing Strategic Innovation Corporate Strategy Product / Marketing Strategy Business Coaching 30
  • 31. Agenda How we think about pricing Customer values Value-based pricing Pricing for maximum return 31
  • 32. The single most important decision in evaluating a business is pricing power Warren Buffet 32
  • 33. Why is pricing important? Price COGS Volume SG&A 0 5 10 15 0.3% 1.7% 9.2% 10.4% Source: SMC 2010 1% improvement of Causes pro鍖ts to increase by 33
  • 34. How is pricing set? Competition Cost Plus or market-based Asked Customers Guessed 0 25 50 75 18% 21% 24% 52% Source: 2013 Price Intelligently survey. Respondents were allowed to select more than one response. 34
  • 35. How NOT to set pricing ? Competition Cost Plus Ask Customers Guess Your competitor sets the price Your costs set a 鍖oor for your price Your customers set the price Just wing it They dont know the right price either Dont let your costs set a ceiling Youre at their mercy Why would anyone want to do this? 35
  • 36. ? If pricing is so important Why are we so bad at it? How can we do better? 36
  • 37. Agenda How we think about pricing Customer values Value-based pricing Pricing for maximum return 37
  • 38. What is value? What we care about when making a buying decision From the customers perspective not the sellers 38
  • 39. What do we pay for? 39
  • 43. What determines value? Context Value Layers Differentiation Special Cases 43
  • 45. You can create value by changing the context of the experience Context 45
  • 46. Context You can create value by changing the context of the experience Where: On site vs. Laptop vs. Cloud When: Same day vs. Next week Why: Emotional vs. Functional Who: Millennials vs. Baby boomers 46
  • 47. What determines value? Context Value Layers Differentiation Special Cases 47
  • 48. Context VALUE LAYERS Different Values at Each Layer Product Solution Type Problem / Job to be Done Role / Identity 48
  • 49. Role / Identity You can create value by targeting di鍖erent roles or identities 49
  • 50. Role / Identity single / spouse / provider status-seeker brand-loyal You can create value by targeting di鍖erent roles or identities user / buyer purchasing agent distributor 50
  • 51. Problem / Job to be Done You can create value by rede鍖ning the problem 51
  • 52. Problem / Job to be Done You can create value by rede鍖ning the problem Lodging: Hotel vs. A place to stay Photos: Capturing memories vs Social sharing CRM: Managing prospects vs. Managing pipeline 52
  • 53. Solution Type You can create value by changing the type of solution 53
  • 54. Solution Type Lodging: Hotels vs. Couch Sur鍖ng Photos: Film vs. Digital vs. Disappearing CRM: On-premise vs. Cloud You can create value by changing the type of solution 54
  • 55. You can create value through product innovation Product 55
  • 56. AirBnB: Rating both hosts and guests Photos: Disappearing images and videos CRM: Integration with other cloud services Product You can create value through product innovation 56
  • 57. Context VALUE LAYERS Different Values at Each Layer Product Solution Type Problem / Job to be Done Role / Identity 57
  • 58. What determines value? Context Value Layers Di鍖erentiation Special Cases 58
  • 59. Theres always an alternative Differentiation 59
  • 60. Differentiation The Competition D I Y Do nothing Theres always an alternative 60
  • 61. Differentiation Differentiation from the alternative defines product value If that differentiation isnt valued, your product has no more value than the competition Di鍖erentiation drives pricing power 61
  • 62. How is your product different from the best alternative? What is the net value of those differences? Differentiation Di鍖erentiation defines value 62
  • 63. What determines value? Context Value Layers Differentiation Special Cases 63
  • 64. Special Cases Topics for another day Pricing Branding Targeting Channels Marketplaces Others 64
  • 65. Pricing You can add value via Pricing Pricing models 65
  • 66. Pricing A higher price can add value, by connoting: Higher quality Rarity / Exclusivity Desirability 66
  • 67. A lower price can add value, by connoting: A good deal A limited-time offer Pricing 67
  • 68. Pricing Models Pricing models are a great area for strategic innovation 68
  • 69. Pricing Models Subscription vs Purchase: Salesforce.com All-you-can-eat Subscription: Net鍖ix Adaptive Subscriptions: Slack Membership: Amazon Prime Pricing model innovation creates value 69
  • 71. What determines value? Your customers values Your own perception of value is irrelevant Your perception is not your customers perception So make sure you measure your customers values 71
  • 73. Agenda How we think about pricing Customer values Value-based pricing strategy Pricing for maximum return 73
  • 74. Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy Start 74
  • 75. 75
  • 76. What is your pricing objective? Market share Revenue Pro鍖t Retention Defend vs. new competitor Awareness / Trial Choose one 76
  • 77. What is your pricing objective? Market share Revenue Pro鍖t Retention Defend vs. new competitor Awareness / Trial Align your entire team to achieve this one objective Choose one 77
  • 78. Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 78
  • 79. Segment for Maximum Return Different customer segments Have different willingness and ability to pay Get di鍖erent amounts of value from the same product 79
  • 80. Different willingness and ability to pay Segment for Maximum Return Price sensitive > Low Margin Value sensitive Quality sensitive > High Margin 80
  • 81. Price sensitive > Low Margin Value sensitive Quality sensitive > High Margin Segment for Maximum Return Different willingness and ability to pay 81
  • 82. Value sensitive Pricing predicament Quality sensitive Price sensitive Perceived value & willingness to pay # of Customers Many Few Low High 82
  • 83. Pricing predicament Low price Value sensitive Quality sensitive Price sensitive Perceived value & willingness to pay Many Few Low High # of Customers 83
  • 84. Low price Many Few Seems right Pricing predicament Willing to pay more Cant afford Perceived value & willingness to pay Lost Customers! Low High Lost Revenue! Sweet spot Lost Revenue! # of Customers 84
  • 85. Pricing predicament High price Value sensitive Quality sensitive Price sensitive Perceived value & willingness to pay Many Few Low High # of Customers 85
  • 86. Cant afford Pricing predicament Seems rightCant afford Lost Customers! Lost Customers! Sweet spot Lost Revenue! Perceived value & willingness to pay Many Few Low High High price # of Customers 86
  • 87. Solution: Segmentation Different segments get di鍖erent amounts of value from the same product Larger companies have more employees using your product use more advanced features make more transactions with your product 87
  • 88. Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 88
  • 89. Value Metric Value metric = the unit by which the customer measures value Value metric determines how much a customer is willing to pay Credit: Steven Forth 89
  • 90. Value Metric Credit: Steven Forth Transactions Leads Impressions Value metric = the unit by which the customer measures value Value metric determines how much a customer is willing to pay New customers Time savings Risk reduction 90
  • 91. Pricing Metric Pricing metric = the unit by which you set a price Find a pricing metric that closely tracks the value metric Credit: Steven Forth 91
  • 92. Metrics The value metric comes from understanding your customers Your pricing metric is an important opportunity for innovation Credit: Steven Forth 92
  • 93. Pricing Metrics in Action Pricing Secrets Company / Product Value Metric Pricing Metric Google Adwords Ad Effectiveness Pay per click Survey Monkey Survey complexity and sample size # of questions, responses, & some functionality Hubspot Clients target market size, marketing activity # of contacts, some functionality & add-ons KissMetrics Depth of app analytics Number of app events Toyota Performance, comfort, luxury Base model, engine, feature bundle 93
  • 94. Segment for Maximum Return Di鍖erent market segments often have di鍖erent value metrics To maximize return, identify best metrics for each segment 94
  • 95. Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 95
  • 96. Enter the Pricing Grid 96
  • 97. Enter the Pricing Grid Pricing metrics Market segments Prices 97
  • 98. Enter the Pricing Grid Market segments? Prices? Are these the right Pricing metrics? 98
  • 99. Determine pricing objective Segment for maximum return Determine metrics Develop your pricing grid Test, iterate & optimize Value-based pricing strategy 99
  • 100. Agenda How we think about pricing Customer values Value-based pricing strategy Pricing for maximum return 100
  • 101. How to Price for Maximum Return Discover and measure what your customers value most Choose the right objective: Market Share? Revenue? Pro鍖t? Other? Segment your market based on their perception of value Identify your customers value metrics Build your pricing grid with matching pricing metrics Track, communicate and charge for value your customers perceive Test, measure, and iterate to optimize Start here Not here 101
  • 102. Do you really know What your customers actually value? What is the value of your differentiation? What are the right segments? What are the right value metrics? What are the right pricing metrics? What are the right prices? 102
  • 103. You dont have to guess What your customers actually value? What is the value of your differentiation? What are the right segments? What are the right value metrics? What are the right pricing metrics? What are the right prices? 103
  • 104. All of these are knowable All of these depend on your customers perception of value Your customers perception of value can be measured 104
  • 105. You wont 鍖nd the right price in the of鍖ce 105
  • 106. Whats a cup of coffee worth? Coffee with customers to discover their values? PRICELESS 106
  • 108. market鍖t.com alan@market鍖t.com @A_Albert Presentation copyright 息 2017 Alan Albert All rights reserved Alan Albert Your Price is Wrong How to price your products for maximum return 108