lean pricing - valueable learnings for monetizing your startup
TRANSCRIPT
Lean pricing
Martin Reichenbachwww.pricing4startups.com
David Leeswww.storyhome.com
About @MktgMartin
www.pricing4startups.com
www.beactivepass.com
www.the-venture.info
Informatik LMU
2008
Simon-Kucher
2010 2014
becoacht
2015www.gruender-voucher.de
Motivation
Price is driving cashflow and thereby keeps our businesses alive
Getting our price model right is massively increasing our chances of success
Changing from a free-for-all model to a profitable model will require large value improvements in
our product
Exception: You‘re only counting on a large investment – and how many will get this?
What is the goal of lean pricing?
Communicate what my companydoes well - in a customer-friendly
language
Offerings and prices that arereflecting my customers
willingness-to-pay
Offerings that are scaling with mycustomers‘ growth
Additional features that have a specific value to few customers
Barriers to entry for people that I want as a customer
Elements to create a great pricing model
Customer intelligence
AKA
„Who is my customer?“
Value metric
AKA
„How does my customer look at the value of my product?“
Price tag
AKA
„How do I determine the willingness-to-pay for my
customer?“
Purchase model
AKA
„How does my customer purchaseproducts in my segment?“
Lean pricing
Customer intelligence
Basic questions :
Who is primarily paying for my product?
This is important especially for marketplace models
Am I selling to end customers or companies?
Advanced questions:
Is there someone else that might pay for the product?
In case I‘m B2B, who is my buyer?
Which needs do I solve for my customer, i.e. what is the value my product generates for my
customer?
Hint
Value metrics
Value metrics always start with „pay per…“
A month is not a value metric, but a purchase model
Based on my industry, a large amount of value metrics are applicable
Example SAP: A small piece of SAPs value metrics list
Named User ConcurrentUser
Active User Revenue Location Employee Data object
CPU GigaBytes Devices Master record Contract Account Barrel of Oil Equivalent per Day
Defining a great value metric
Basic questions: Which metrics…
… reflect my customers‘ value perception?
… help my company to grow with my customers‘?
… helps differentiating customer segments?
… are understood well by my customer?
Advanced questions: Which metric(s)…
… align revenue with cost and risk?
… synchronize payment with consumption?
… allow me to differentiate from competitors?
Storyhome - Value Metric
Model 1 Model 2 Model 3 Model 4 Model 5
Name Pay per minute Pay per recording Pay per userPay per family
monthPay per playback
ExplanationPay per minute stored on the
server
The user has to pay based on the
number of stories recorded
Each user has to pay a monthly
fixum independent of usage
Each familiy has to pay a certain
amount to use the system
The user has to pay based on the
number of playbacks
Evaluation 4.09 3.29 3.87 4.04 2.67
Purchase model choice
User Value Purchase Model Products
ImmediateOne-off monetization (w/o money back guarantee) Retail, On-premise software
Portfolio / Product line pricing Fashion labels (Hugo vs. Hugo Boss)
Increases with time
Subscription model: Limited Free Trial, also Feature / Menu-based pricing
SaaS, Telecommunication
Advertising-based monetization: Product or service is free, revenue from ads and critical mass
Content marketers / bloggers, Facebook, Google
Free product, put pay for services (CAPEX to OPEX) OpenSource software provider, Aircraft Engines, Surgical Robots, Business Coffee Machines
Razor blade model Printers, Soda Stream
Entry Professional Expert Enterprise
Packaging: SaaS project
Leader
Filler 2 Filler 2
Filler 4
Filler 5
Filler 1
Leader 1
Leader 2Configuration
upon request
Filler 3
Platform Platform Platform
XX€ /
month
XX€ /
month
XX€ /
month
From XX€
/ month
Approaches to identify my price tag
Cost-plus
Price = (Fixed cost + variable cost) * (1 + Markup) Very often used by startups selling physical goods Retail examples: Fridges: cost plus 25 per cent / Branded clothing: cost plus 135
per cent / Jewelry: cost plus 250 per cent or more
Competition-based pricing:
Prices are based on the current competition, e.g. average across competition Often used for service pricing in startups and established companies
Value-based pricing
Prices are based on perceived value by the user Rarely used in a relevant fashion by any company Factors for Value based pricing (among others): Convenience, Brand, Fashion &
Trends, Monopolies and cartels, Pure perceived value Supply and demand
Apply discount schemes:
Volume tiers Cumulative discount Pre-payment discounts
Road to value based pricing: Van Westendorp
https://de.surveymonkey.com/s/5CG5PTG https://de.surveymonkey.com/s/2S3YTKF
Vorstellung GRÜNDER-Voucher
Lokales Gutscheinheft für München
20 exklusive Angebote von ausgewählten, meist lokalen Sponsoren aus den
folgenden Bereichen:
Design | Print | Event-Management | Anwälte | Steuerberater | Beratungsleistungen (u.a. UX-
Consulting, Pricing) | Performance Marketing | Outsourcing-Anbieter | Co-Working Space | PR
Typische Angebote sind freie Dienstleistungen, 50% Discount auf Startup-Pakete,
Kostenfreie PR-Meldung etc.
Das Gutscheinheft ist auf 500 Stück je Ausgabe limitiert
Gesamtwert aller Gutscheine liegt bei ca. 2.000 EUR
Weitere Infos unter www.gruender-voucher.de
Bitte fülle folgenden Fragebogen aus! https://de.surveymonkey.com/s/2S3YTKF
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Van Westendorp results – Gründer-Voucher
The Van Westendorp result can identify price thresholds. The methodology also shows take rates at varous price levels.
% of Respondents
too expensive
reasonableToo cheap
At what price do you think the Gründer-Voucher booklet would be ....
Price level €
expensive
Lower price limit
Upper price limit
Price perceived as normal
Price for market penetration
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INEXPENSIVE
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EXPENSIVE
TOO EXPENSIVE
Van Westendorp results – StoryHome
The Van Westendorp result can identify price thresholds. The methodology also shows take rates at varous price levels.
% of Respondents
too expensive
reasonable
At what price do you think the StoryHome service would be ...
Price level €
expensiveUpper price limit
Price perceived as normal